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The IRS defines a gift as property given by one individual to another while receiving less than its value, or nothing, in return. A gift can be money, real estate or other items of value. Gift tax is the tax attached to high-value gifts.
Limits
A person can give a gift valued at $13,000 to an individual before gift tax is imposed. This amount is accurate as of 2009; the IRS increases this limit regularly.
Spouse
Each spouse is entitled to a gift tax exclusion. A married couple can gift up to $26,000 to an individual before tax is attached.
Payment
Any gift tax due is the responsibility of the gift giver. The giver is allowed an exclusion for each recipient. A gift recipient is eligible to receive a gift of any amount with no gift tax consequence, however, he may volunteer to pay the tax.
Exclusions
Tuition and medical expenses are not considered gifts. Transfers of property to a spouse, political parties or charities are also excluded.
Cautions
An item sold for less than its value or a loan with no or low interest is also considered a gift and must be reported if over the exclusion limit.
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