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Time is Running Out for 2012 Gifting Opportunities

By: Donna M. Mullin, J.D., CPA

Until the end of 2012, there is an unprecedented opportunity to make lifetime gifts free of federal estate or generation skipping taxes. The federal tax law, due to expire December 31, 2012, currently provides for lifetime gifting of up to $5,000,000 per donor, and $10,000,000 for married individuals. After the end of 2012, this limitation will return to $1,000,000 per donor unless Congress passes legislation to change it.

This is an opportunity to make lifetime gifts of business or other interests which may not reoccur and we encourage you to consult with your tax advisors to determine if you should make strategic gifts before year end.

Who should be acting now to institute a gifting plan?

This opportunity is particularly attractive to closely held business owners who wish to pass some ownership during their life time to the next generation. Due to the current state of the economy, valuations of businesses for gifting purposes are tending to be lower, making gifting at the lower values even more attractive. And the law currently still allows discounting to be applied in valuing gifted interests under the appropriate circumstances. Gifts of business interests generally should be based upon a valuation report. If you are interested in pursuing this opportunity, now is the time to discuss the steps necessary to complete a gifting plan. This includes determining if there are necessary valuation reports that need to be done before the anticipated year end rush.

If you have real estate holdings you wish to pass to your children, 2012 may be your window of opportunity. With the higher gift tax exclusion for 2012 in place, gifts of real estate can be more easily made without splitting parcels to stay under the lifetime gifting threshold. The $1,000,000 threshold which existed historically and is due to return January 1, 2013, made it particularly difficult to transfer even moderate real estate holdings during lifetime without incurring gift taxes. Once again, gifting real estate generally requires a formal valuation and these take time to secure. If you think you may be a candidate for gifting real estate holdings, acting now rather than in the fall, will enable you to make sure you can complete the transfers before year end.

We encourage you to call us and have a conversation about whether this opportunity is the right one for you and your family. If it is, we can assist you in designing a gifting plan and getting it accomplished before year end.


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Donna Mullin, J.D., CPA


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