Publication 950 (12/2009), Introduction to Estate and Gift Taxes

IRS Resources

Publication 950 - Introductory Material

Table of Contents

What's New

The applicable exclusion amount for estates of decedents dying in calendar year 2009 is $3,500,000. See Unified Credit (Applicable Exclusion Amount), later, for more information.
The annual gift exclusion for 2009 increased to $13,000. See Annual exclusion, later, for more information.

Introduction

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, on page 6.

Even if tax applies to your gifts or your estate, it may be eliminated by the unified credit, discussed later. However, many estates are subject to federal income tax. See Income Tax on an Estate on page 11.

No return needed. Gift tax returns are filed annually. However, you generally do not need to file a gift tax return unless you give someone, other than your spouse, money or property worth more than the annual exclusion (discussed on page 6) for that year, or a gift not subject to the annual exclusion. An estate tax return generally will not be needed unless the estate is worth more than the applicable exclusion amount for the year of death. This amount is shown in the table under Unified Credit (Applicable Exclusion Amount), later.

No tax payable by the person receiving your gift or bequest. Generally, the person who receives your gift or your bequest will not have to pay any federal gift tax or estate tax because of it. Also, that person will not have to pay income tax on the value of the gift or inheritance received. However, covered gifts or bequests received from expatriates after June 16, 2008, may be subject to tax. Consult your tax adviser for more information.

No income tax deduction. Making a gift or leaving your estate to your heirs does not ordinarily affect your federal income tax. You cannot deduct the value of gifts you make (other than gifts that are deductible charitable contributions).

What this publication contains. If you are not sure whether the gift tax, the estate tax, the income tax, or the GST tax applies to your situation, the rest of this publication may help you. It explains in general terms:

When tax is not owed because of the unified credit,
When the gift tax does and does not apply,
When the estate tax does and does not apply,
When to file a return for the gift tax or the estate tax,
When the GST tax may apply, and
When the income tax may apply to an estate.

This publication does not contain any information about state or local taxes. That information should be available from your local taxing authority.

Where to find out more. This publication does not contain all the rules and exceptions for federal estate, gift, income, or GST taxes. Nor does it contain all the rules that apply to nonresident aliens. If you need more information, see the following publication, forms, and instructions.

Publication 559, Survivors, Executors, and Administrators;
Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return;
Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return;
Form 706-NA, United States Estate (and Generation-Skipping Transfer) Tax Return; and
Form 1041, U.S. Income Tax Return for Estates and Trusts.

To order these forms, call 1-800-TAX-FORM (1-800-829-3676). If you have access to TTY/TDD equipment, you can call 1-800-829-4059. To get these forms using your personal computer, go to www.irs.gov.

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