Estate and Gift Taxation

An estate tax is imposed on the transfer of property by death. The preparation and filing of an estate tax return and the payment of the tax are duties of the decedent’s representative, who is charged with administration of the estate. The administrator or executor receives from the probate court an accrediting document which authorizes him to act in the representative capacity. If an estate is informally administered without appointment of an administrator or executor or reference to a probate court, any heir, or other beneficiary who received property of the decedent is liable for the filing of the estate tax return and for the tax up to the value of the property received by him. Consult with an experienced tax attorney to know the exact estate tax payable.
All assets and liabilities of the decedent must be reported and valued on the return, and his assets constitute the gross estate, which is defined to comprise the value not only of the assets the decedent directly owned at his death but also of certain assets which he transferred to others during his lifetime or over which he maintained proprietary controls during his lifetime. From the value of the gross estate his debts, funeral expenses, bequests to charities, and certain other charges and exemptions are deducted, and the tax is computed on the resulting value of the net estate. Within two months after the death of a citizen or resident who left property exceeding the value determined by the government, the legal representative or custodian of the property must give notice on Form 704 to the Director of Internal Revenue for the district of the decedent’s last residence. An experienced tax attorney can help determine the estate tax payable.
A gift is imposed on the transfer of property by gift and applies to all net gifts made during the year by a citizen or resident and to all gifts of property situated in theUnited Statesmade by a nonresident alien. Any individual who gives more than $3,000, or property worth more than $3,000, to any one person in any year is required to report the gift by March 15 of the succeeding year on Form 709 whether or not the gift is taxable, and to pay the tax, if any. Corporations, trusts, and other entities are not required to file, but gifts made by them must be reported by the individual stockholder, partner, or other participant. If the donor fails to file the return or pay the tax, then the donee (i.e., the recipient) becomes liable, and in any event the donee must report the gift’s receipt on Form 710. On Form 709 each gift to each donee must be separately described and valued. If the gift was made by a married person, each spouse may report one half. If the gift was made to the donor’s spouse, he or she may deduct one half. There may be deducted an exclusion of $3,000 of gifts (other than gifts of future interests) for any year made to one person, and an exclusion of the full amount of gifts made to public or charitable organizations. In addition each individual is entitled to a lifetime exemption of $30,000 which, unlike the exclusions mentioned above, is not annually available, but can be used until absorbed.
An experienced tax attorney can provide you with invaluable advice on lowering and sometimes avoiding gift and estate taxes legally.


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