US Gift tax is imposed on the donor in the US for gratuitous transfer of property or money during his lifetime. One purpose of gift tax is to discourage a person from avoiding estate tax by giving away all his assets before death.
Any transfer, where full consideration is not received, is a gift.
Such gift is completely gratuitous when the donor charges nothing in return. Again, a transfer is gratuitous in part when the donor parts with the property at a concession price that is substantially below the fair market value of the same.
Though the donor is responsible for paying the gift tax, yet under special arrangements the donee may agree to pay the tax instead.
There are two levels of gift tax exemptions. Firstly, transfer up to $ 12,000 each to as many persons the donor likes in a year are not liable to gift tax. Similarly a married couple can combine their individual gift tax exemption limit to make gift up to $ 24,000 each to any number of recipients in a year without gift tax.
Secondly, there is a credit that effectively exempts a donor from gift tax so long gift to a particular recipient does not exceed $ 1, 00,000.
Moreover, gift to qualifying charities are deductible from the value of the gift(s) made.
Gift to the taxpayer’s spouse, charities or political organization for its use, payment of medical or tuition bills for some one else directly to the concerned medical or educational institution and gift amounts not more than the annual exclusion for the year, are not taxable gifts.
The taxpayer cannot deduct the value of the gifts from his income tax return, except for gifts that are deductible charitable contributions.
(More:http://www.irs.gov/businesses/small/article/0,,id=98968,00.html
http://www.irs.gov/businesses/small/article/0,,id=108139,00.html)
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