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Question for the Money Doctors

Question submitted on Oct 18, 2012.

Question

My mother recently gifted $30,000 to each of her three children. Does this mean gift tax will be due on the $17,000 over the exemption per child? How does the lifetime exemption come into play?

Answer

The gift tax exemption for 2012 is $13,000 per donee and it will be $14,000 for 2013. The $17,000 per donee will need to be reported on Form 709 which is the Gift Tax Form. The lifetime exemption for 2012 is $5,120,000, so therefore $51,000 of the lifetime exemption will be used. If Congress does not make any changes, the lifetime exemption will go back to $1,000,000, adjusted for inflation which is calculated to be around $1,360,000.

Since your mother has not exceeded her lifetime exemption, no gift tax will be due. However, it is a good idea to file the Form 709 at tax time to start the statute of limitations so the IRS cannot audit this gift after three years. The Form 709 will be due on April 15, 2013.


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