Taxation

Overview of the Taxpayer Relief Act of 1997

The Taxpayer Relief Act of 1997 (H.R. 2014) was signed by President Clinton on August 5, 1997. The key provisions that we believe will affect gift and estate calculations are listed below. (Editor's note: Many provisions of the Taxpayer Relief Act of 1997 were superceded by The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) and/or The Jobs and Growth Tax Relief and Reconciliation Act of 2003 (JGTRRA)).

Taxable Gift

A taxable gift is a transfer of assets from one person to another that is subject to gift tax. The federal annual gift tax exclusion in 2015 allows every person to transfer up to $14,000 per year to each of any number of other people (the $14,000 is indexed for inflation and may change in future years). Transfers above this amount are taxable gifts.

Unlimited Marital Deduction

The unlimited marital deduction is the transfer tax deduction available for qualifying transfers between spouses. There is no limit to this deduction, so there is never any transfer tax on qualifying transfers between spouses, no matter how large the transfer.

For a transfer between spouses to qualify for the unlimited marital deduction, there must be no nondeductible terminable interest in the transfer. This means that when the receiving spouse's interest in the transfer terminates, no other person may continue to hold an interest in the property.

Federal Income Tax Rate Reductions Under JGTRRA 2003

On May 28th, 2003, President Bush signed into law the Jobs and Growth Tax Relief and Reconciliation Act of 2003 (JGTRRA). The law makes no changes that directly affect deferred giving arrangements. However, it does enact reductions in the individual tax rates. Highlights of JGTRRA that may be of interest to gift planners include a reduced capital gains tax rate, reduced dividend tax rate and acceleration of the reductions in marginal income tax rates that were already scheduled.

Federal Income Tax Rate Reductions Under JGTRRA 2003

On May 28th, 2003, President Bush signed into law the Jobs and Growth Tax Relief and Reconciliation Act of 2003 (JGTRRA). The law makes no changes that directly affect deferred giving arrangements. However, it does enact reductions in the individual tax rates. Highlights of JGTRRA that may be of interest to gift planners include a reduced capital gains tax rate, reduced dividend tax rate and acceleration of the reductions in marginal income tax rates that were already scheduled.