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Monday, January 17, 2011

Gift Taxes

For gifts made in 2010, the 2010 Tax Relief Act provides that gift tax is computed using a rate schedule having a top tax rate of 35 percent and an applicable exclusion amount of $1 million. For gifts made after 2010, the gift tax is reunified with the estate tax with a top gift tax rate of 35 percent and an applicable exclusion amount of $5 million.
COMMENT 
A previous act deunified the gift and estate taxes. The 2010 Tax Relief Act reunifies the gift and estate taxes for gifts made after December 31, 2010.
Donors of lifetime gifts continue to be able to apply the annual gift tax exclusion before having to use part of their applicable exclusion amount. For 2010 and 2011, that inflation-adjusted annual exclusion amount is $13,000 per donee (married couples may continue to “split” their gift and may make combined gifts of $26,000 to each donee).

Generation Skipping Tax (GST)

The 2010 Tax Relief Act provides a $5 million exemption amount for 2010 (equal to the applicable exclusion amount for estate tax purposes) with a GST tax rate of zero percent for 2010. For transfers made after 2010, the GST tax rate would be equal to the highest estate and gift tax rate in effect for the year (35 percent for 2011 and 2012). The 2010 Tax Relief Act also extends certain technical provisions under a previous act affecting the GST tax.

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