[jively]

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Does the gift giver owe any tax for giving a gift or just for the original income?

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"Original income?" Be careful with words. Let's say my friend earned $1.5 million in 2006, and paid income tax on the income. After tax, he has $1 million that he took out of the bank and has in cash in his closet.

Now in 2007 he gives my $1 million in cash. He owes no tax on it because he paid the tax in 2006, and he has no income in 2007.

For gift tax purposes, he gives me $1 million, and he has to file a gift tax return for 2007 showing that he gave a non-spouse US citizen more than $12,000 for the year. He does not owe any tax.

I take the $1 million tax free. I do not have to file anything.

The $988,000 he gave me over $12,000 starts to use up his unified credit. He won't be able to give much more to non-spouse US citizens over his lifetime before he does have to begin paying the actual gift tax.

Now, why do all the people here have friends giving them more than $12,000 in a year? How can I meet these friends of yours?

-Tom