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Gift Tax

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Business Glossary

Definitions for: federal gift tax
federal gift tax

federal tax imposed on the transfer of securities, property, or other assets. The donor must pay the tax based on the fair market value of the transferred assets. However, federal law allows donors to give up to $12,000 per year to any individual without incurring gift tax liability. So, a husband and wife may give $24,000 to their child in one year without tax if each parent gives $12,000. This practice is known as gift splitting. According to the taxpayer relief act of 1997, this gift tax limit is indexed to inflation in $1000 increments starting on January 1, 1999. For those making gifts over the limit, a gift tax return using IRS form 709 must be filed by April 15th of the year following the year of the gift.

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