If you give any one person gifts valued at more than $10,000 in 2001, it is necessary to report the total gift to the Internal Revenue Service. You may even have to pay tax on the gift. For 2002, the amount rises to $11,000.
The person who receives your gift does not have to report the gift to the IRS or pay gift or income tax on its value.
You make a gift when you give property, including money, or the use or income from property, without expecting to receive something of equal value in return. If you sell something at less than its value or make an interest-free or reduced-interest loan, you may be making a gift.
There are some exceptions to the tax rules on gifts. The following gifts do not count against the annual limit:
- Tuition or medical expenses that you pay directly to an educational or medical institution for someone's benefit
- Gifts to your spouse
- Gifts to a political organization for its use
- Gifts to charities
If you are married, both you and your spouse can give separate gifts of up to the annual limit to the same person without making a taxable gift.
This daily Tax Tip has been provided by the Internal Revenue Service.
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