2012 Year-End Gift Planning

Techniques Available to Taxpayers and Potential IRS Problems

James F. Hopson, JD, CPA

Time is running out on using the $5 million gift tax exemption ($10 million when including a spouse's exemption), and no one knows what 2013 will bring. Although Congress remains in a stalemate at the time of this writing, there is still time to pass legislation before the current law sunsets. The government collects approximately $10 billion in estate taxes each year, so, in this author's opinion, repealing this tax probably has less than a 15% chance of happening. Under current congressional policy, spending cuts would have to be made in order to pay for the repeal of the tax, or Congress would have to raise additional taxes elsewhere. If Congress does not act, the exemption will revert back to $1 million and the top tax rate to 55%. Even if Congress does not act during the lame-duck session, some speculate that it could retroactively enact new legislation in 2013 that would provide for an exemption greater than $1 million but less than $5 million. In the author's opinion, such legislation probably has a 75% chance of passing.