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Inheritance and
Gift Tax
Ordering
TurboTax Online Software
Interest/Dividends/Other
Types of
Income:
Gifts &
Inheritances
If you give someone money or property during your life, you may be subject to federal gift tax. The money and property you own when you die (your estate) may be subject to federal estate tax and the gross income of your estate may be subject to federal income tax. The purpose of this publication is to give you a general understanding of when these taxes apply and when they do not. It explains how much money or property you can give away during your lifetime or leave to your heirs at your death before any tax will be owed. Gifts you make during your life or bequests from your estate can also be subject to the generation-skipping transfer (GST) tax, if the gifts or bequests are to a person, such as a grandchild, who is more than one generation younger than you.
No tax owed. Most gifts are not subject to the gift tax and most estates are not subject to the estate tax. For example, there is usually no tax if you make a gift to your spouse or to a charity or if your estate goes to your spouse or to a charity at your death. If you make a gift to someone else, the gift tax usually does not apply until the value of the gifts you give that person exceeds the annual exclusion for the year. See Annual exclusion under Gift Tax,
To
determine
if
the
sale
of
inherited
property
is
taxable,
you
must
first
determine
your
basis
in
the
property.
The
basis
of
inherited
property
is
generally
one
of
the
following:
(1)
The
fair
market
value
(FMV)
of
the
property
on
the
date
of
the
decedent's
death.
(2)
The
FMV
of
the
property
on
the
alternate
valuation
date
if
the
executor
of
the
estate
chooses
to
use
alternate
valuation.
See
the
Form
706
Instructions,
United
States
Estate
(and
Generation-Skipping
Transfer)
Tax
Return.
If
you
or
your
spouse
gave
the
property
to
the
decedent
within
one
year
before
the
decedent's
death,
see
Publication
551,
Basis
of
Assets.
Report
the
sale
on
Form
1040,
Schedule
D,
Capital
Gain
and
Losses.
If
you
sell
the
property
for
more
than
your
basis,
you
have
a
taxable
gain.
For
information
on
how
to
report
the
sale
on
Schedule
D,
please
see
Publication
550,
Investment
Income
and
Expenses.
References:
Publication
950
(9/2010),
Introduction
to
Estate
and
Gift
Taxes
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