01 May 2006

Gift and Estate Taxes In 2006

My main day job activity is estate planning. If you are not someone for whom the gift and estate tax is relevant, you don't have to read this post. But, as a public service, here are some basic headlines for 2006, for those who missed them at the beginning of the year from the usual tax information services, straight the IRS. Most interestingly, there is actually a tax form that the IRS now insists that we not file early. This hasn't been much of a problem with Form 1040, but gift tax return filers are ruthlessly efficient.

The annual exclusion for gifts is raised to $12,000 beginning in 2006

The applicable exclusion amount is increased to $2,000,000 for estates and remains at $1,000,000 for gifts . . . .

Page 4 of the instructions for Form 709 states (Under When to File) that "...you must file the 2003 Form 709 on or after January 1...). It may not be clear, but this means that returns should not be filed until January 1 through the due date of the year following the year in which the gift is made. In other words, any gifts made in 2004 will not be due (and cannot be processed) until after December 31, 2004. . . .

Form 709-A, United States Short Form Gift Tax Return, is now obsolete and should not be filed. All gift tax returns must now be filed using Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return.

Feel free to send your tax free gift of $12,000 my way any time.

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