Applying the Use-it-Or-Lose-it Philosophy to the Lifetime Gift Tax Exemption

Posted: 10 May 2003


The Economic Growth and Tax Relief Reconciliation Act of 2001 (the Act) fundamentally transforms the estate planning landscape by repealing the estate tax (at least temporarily) and maintaining the gift tax. On one hand, Congress repealed the estate tax on the pretext of fostering intergenerational transfers between family members and eliminating double taxation. On the other hand, Congress maintained the gift tax as a mechanism to preserve the integrity of the progressive rate structure of the income tax system.

This report argues that Congress made a grave tactical error insofar as the Act permits a $1 million gift tax exemption. As a general rule of thumb, our culture is one that exploits tax benefits and loopholes. The use of the gift tax exemption promises to be no exception to this general rule; undoubtedly, taxpayers will look for every angle to capitalize on the use of this exemption. Congress should not be surprised: after all, taxpayers will be doing nothing more than simply embracing the age-old use-it-or-lose-it philosophy.

Suggested Citation

Soled, Jay, Applying the Use-it-Or-Lose-it Philosophy to the Lifetime Gift Tax Exemption. Available at SSRN:

Jay Soled (Contact Author)

Rutgers University ( email )

1 Washington Park
Newark, NJ 07901-1825
United States
(973) 353-1727 (Phone)

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