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HOW FEDERAL GIFT TAX APPLIES?

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HOW FEDERAL GIFT TAX APPLIES?

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The gift tax rules apply to the transfer by gift of any property. You make a gift if you give property (including money), or give the use of property, or give the income from property without expecting to receive something of at least equal value in return. If you sell something at less than its full value or if you make an interest-free or reduced-interest loan, you may be making a gift. The general gift tax rules are that any gift is a taxable gift. However, there are many exceptions to this rule. Generally, the following gifts are not taxable gifts: • Gifts that are not more than the annual $12,000 exclusion for the calendar year beginning in 2006 (This is called the Annual exclusion for any 12 month period, see below). • Tuition or medical expenses you pay directly to a medical or educational institution for someone, • Gifts to your spouse, • Gifts to a political organization for its use, and • Gifts to charities. • Annual gift tax exclusion. A separate annual gift tax exclusion ap

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