Scheduled to decrease January 1, 2013, the federal gift tax exemption will go from the $5.12 million to $1 million*. Many individuals have made substantial gifts this year to take advantage of the high exemption. The type of assets gifted vary; from unique art collections and family business interests to real property, securities, and cash.
As part of the gifting process, each gift exceeding the annual exclusion ($13K) must be valued and reported on a federal gift tax return (IRS form 706). An individual will not need to pay any gift tax until his or her gifts exceed the full amount of the exemption. The IRS keeps an official record 0f each individual’s giving history so it is critical to obtain evidence of a gift’s monetary value for gift tax purposes.
The value of cash and securities is easy to ascertain; however, other gift types often necessitate obtaining an appraisal from an experienced appraiser. An appraisal is particularly important when gifting unique assets, collectibles, business interests, real estate, or any other assets that may appreciate substantially after the gift is made. My motto: when in doubt, hire a professional appraiser to value the gift.
*There is uncertainty with regard to the gift tax exemption of 2013. It all depends upon the action (or inaction) taken by Congress. Most likely, it will be less than the current $5.12 million exemption of 2012.
