gift tax

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gift tax

n. Federal tax on large gifts. Gifts to members of a family may be up to $10,000 a year to each plus a life-time $30,000 in gifts without tax. Several states also impose gift taxes. As with all tax questions, professional assistance in gift tax planning is vital.

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With a family loan, the individual providing the money should be sure to charge an interest rate that reflects a fair market value, or the loan may become subject to federal gift taxes. To avoid future strife with the IRS, Steve Pyrek, an IRS spokesperson, explains that entrepreneurs can use section 7872, subsection D of the IRS code for exact federal rules.
On the McCords' 1996 gift tax returns, the gifts' taxable values were based on the gross FMV transferred to the nonexempt donees ($6,910,933), reduced by the total Federal gift taxes payable and the actuarially determined present value of their obligations for additional estate taxes under Sec.
Also, each annuity payment represents a gift to the mother, so Sue could be liable for federal gift taxes.

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