Q:

Subject:  annual exclusion and lifetime exclusion

Dear Mr. Kerstetter,
 
I found and read you article on lifetime exclusions and annual exclusions dated September 2008. I enjoyed your satire and was wondering if there was a more recent version using the 2009 numbers.
 
I had a friend tell me his accountant told him his annual exclusions counted toward his lifetime exclusions and you article states otherwise. If you would, I would appreciate it greatly to know where to find the tax code referenced.
 
Thanks for the article.
 
Jim Younger

A:

That is very scary; that a professional tax advisor could be so off on such a basic principle of gift and estate taxation.

I updated my page on the Gift Tax  to reflect the new $13,000 annual exemption.  I also added links to download the IRS instructions for the 706 and 709, which should give you more detailed info.

Basically, if you look at the actual 709, you will see that it deals with "Taxable Gifts" when accounting for the lifetime exclusion and how much has already been used up.  Annual gifts of under the exclusion amount are simply not classified as Taxable Gifts and thus do not affect the lifetime exclusion.

Before deciding on any gifting scenario, you need to work with a professional tax advisor who understands these concepts.

Good luck.

Kerry Kerstetter

Labels: Gifting

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 4/24/2009 08:27:00 PM Send this post: