A law passed late in 2010 has resulted in a quadrupling of tax-free gifts less than two years later, according to a recent item by Bloomberg News.
“U.S. taxpayers reported making $122 billion in nontaxable gifts on the returns they filed in 2012, more than four times the amount in each of the two previous years,” according to Bloomberg News.
The Internal Revenue Service released the data in late January.
“Most of the money, $84 billion, came in the form of gifts exceeding $1 million, and those were made by fewer than 30,000 people, according to the IRS,” the story stated. “The data cover tax returns filed in 2012. Typically, gift-tax returns are due on April 15 of the year after the gift is made.
“The law created a chance for wealthy families to move assets out of their estates and let their heirs benefit from any appreciation in value, said Lisa Featherngill, a managing director at Abbot Downing, a wealth-management unit of Wells Fargo and Co.”
“There was a huge scramble after 2010 to take advantage of the new law,” she told Bloomberg News. “There was concern that the law was going to revert.”
The 2010 law increased the lifetime gift-tax exclusion to $5 million from $1 million,” the story noted.
“The 2010 law was temporary and was scheduled to expire in December 2012, and estate planners encouraged their clients to make gifts soon in case Congress changed the law,” Bloomberg noted. “In January 2013, after the higher exemptions had technically expired, Congress extended the gift-tax changes and permanently linked them to inflation. The exclusion this year is $5.34 million per person.
“That permanent feature of the tax code means that the increase in nontaxable gifts in 2012 probably won’t last, said Harry Stein, associate director of fiscal policy at the Center for American Progress, a Washington group typically aligned with Democrats.”