The Gift Tax

Are you thinking of gifts to give your loved ones? The gift tax was originally designed to prevent people from escaping estate taxes of properties that they have given their children and families. For our purpose here, a gift is a transfer of property for less than its full value.

While Congress has remarkably reduced the estate tax (from 47% in 2005 to 45% in 2009, to 35% yet just a year later), it has nevertheless retained the gift tax. This is because the gift tax works as another preventive measure against families who rotate their assets among its members to maintain and level their income tax rates. Numbers aside, it would do us good to keep in mind that the real essence of giving gifts is making people happy.