Contingencies and the Gift Tax

Abstract:     
The 2001 Tax Act has markedly changed the purpose of the gift tax; no longer a backstop to the estate tax, its sole purpose is to prevent abuses of the income tax. As it stands, the retention of the gift tax with the repeal of the estate tax is rife with inconsistencies. Although the best solution is to retain both the gift and estate taxes, if repeal of the estate taxes actually occurs consistent with this act, with its new single focus, the gift tax rules defining when a gift occurs need to be revised so that they best serve the function of prepayment of income taxes that may be lost on transfers of property from high-bracket to lower-bracket and foreign taxpayers.

Number of Pages in PDF File: 9

Keywords: 2001 Tax Act, gift tax, estate tax repeal, contingencies

JEL Classification: H20, H24, H29, K34

Accepted Paper Series