Congress voted in December 2010 to let wealthy Americans make tax-free gifts of as much as $5 million -- and the money flowed.
U.S. taxpayers reported making $122 billion in nontaxable gifts on the returns they filed in 2012, more than four times the amount in each of the two previous years. The Internal Revenue Service released the data today.
Most of the money -- $84 billion -- came in the form of gifts exceeding $1 million, and those were made by fewer than 30,000 people, according to the IRS. The data cover tax returns filed in 2012. Typically, gift-tax returns are due on April 15 of the year after the gift is made.
The law created a chance for wealthy families to move assets out of their estates and let their heirs benefit from any appreciation in value, said Lisa Featherngill, a managing director at Abbot Downing, a wealth-management unit of Wells Fargo & Co.
“There was a huge scramble after 2010 to take advantage of the new law,” she said. “There was concern that the law was going to revert.”
All six of Featherngill’s direct clients, who generally have at least $50 million in investable assets, made large gifts in 2011 or 2012, she said.
The 2010 law increased the lifetime gift-tax exclusion to $5 million from $1 million. Republicans, including then-Senator Jon Kyl of Arizona, won favorable language on estate and gift taxes in exchange for agreeing to cut payroll taxes and extend tax credits for college tuition and low-income families.
Temporary Law
The 2010 law was temporary and was scheduled to expire in December 2012, and estate planners encouraged their clients to make gifts soon in case Congress changed the law.
The figures could be even more dramatic for gift returns filed last year for assets transferred in 2012.