Explanation of Federal Annual Exclusion

The maximum amount that a person is allowed to give another person without incurring Federal gift tax.  The current 2008 annual exclusion is $12,000 per year per recipient. There is no limit on the number of these gifts you can make to different people in a year. To qualify, a gift must be of a “present interest," meaning that the recipient can make use of the gift immediately, and the donor must not have any control over the asset after it is given.

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Letter on Estate and Income Tax Planning – Federal Gift Tax Exclusions