Part 1 - Individuals - Specialized Returns For Individuals

This section of the exam covers matters related to estate and gift taxes. Estate taxes are imposed on an heir's inherited portion of an estate if the value of the estate exceeds an exclusion limit set by law. Gift taxes, on the other hand, are federal taxes applied to an individual who gives anything of value to another person. For the item to be considered a gift, the recipient cannot pay the giver the full value of the gift (but may pay some amount less than the full value). It is the giver who has the tax burden.

Estate Tax
Careful estate planning is important because estate taxes can significantly (and negatively) affect an heir's inheritance. The estate tax is mostly levied on assets left to heirs, but does not apply to the transfer of assets to a surviving spouse. The right for a spouse to leave any amount of assets to another spouse is known as the "unlimited marital deduction." As an Enrolled Agent, you should understand concepts related to a client's estate tax liability including:

Gift Tax
Certain gifts are typically excluded from the gift tax, including gifts to a spouse, gifts to political organizations that will be used by the political organization, gifts that are valued below the annual gift tax exclusion for a particular year, and medical and educational expenses. As part of estate planning, gifts may be given each year up to the maximum amount allowed by law. Enrolled Agents should be familiar with laws regarding the gift tax including:

Types Of Businesses
Related Articles
  1. Taxes

    6 Tax Breaks That Anyone Can Claim

    Many can be applied to an individual’s return, and you don’t need to be a financial genius to claim them. Here are six credits or deductions that could be yours for the taking.
  2. Taxes

    7 Expenses You Won’t Believe Are Deductible

    You may be surprised at some of the things that qualify as legitimate tax deductions. Here are seven that are especially quirky.
  3. Taxes

    6 Tax Myths Everyone Should Know

    The notion that large refunds are good is but one of many enduring tax myths. Here are five more you should know.
  4. Professionals

    7 Tips for Year-End Financial Planning

    There is always a rush to get financial planning tasks done at year's end. Here are some tips to help ease the crunch.
  5. Professionals

    How to Navigate Taxable Mutual Fund Distributions

    It's almost time for year-end capital gains distributions for mutual funds. Here's how to monitor them and minimize their tax impact.
  6. Investing

    How ETFs May Save You Thousands

    Being vigilant about the amount you pay and what you get for is important, but adding ETFs into the investment mix fits well with a value-seeking nature.
  7. Professionals

    How to Protect Your Portfolio from a Market Crash

    Although market crashes are usually bad news for your portfolio, there are several ways to minimize losses or even profit outright from market movement.
  8. Taxes

    Here's How to Deduct Your Stock Losses From Your Tax Bill

    Learn the proper procedure for deducting stock investing losses, and get some tips on how to strategically take losses to lower your income tax bill.
  9. Professionals

    Tax Efficient Strategies for Mutual Funds

    Before you sell mutual fund shares, consider these tax strategies first.
  10. Professionals

    Dodging the Dangers of Self-Directed IRAs

    Self-directed IRAs are an attractive option for investors looking to build nest eggs. But they should exercise caution in avoiding prohibited transactions.
  1. Structured Transaction

    A series of transactions that could have been treated as a single ...
  2. Tax Deductible Interest

    A borrowing expense that a taxpayer can claim on a federal or ...
  3. Working Tax Credit (WTC)

    A tax credit offered to low-income individuals working in the ...
  4. Proof of Charitable Contributions

    Substantiation required by the Internal Revenue Service for a ...
  5. Quid Pro Quo Contribution

    A charitable donation for which the donor receives something ...
  6. Readvanceable Mortgage

    A mortgage feature that allows the borrower to re-borrow the ...
  1. What is the annual contribution limit for a 529A account?

    Contributions to a 529A plan are limited up to the annual gift tax exclusion limit, currently $14,000 a year in after-tax ... Read Full Answer >>
  2. Why is the Cayman Islands considered a tax haven?

    The Cayman Islands is one of the most well-known tax havens in the world. Unlike most countries, the Cayman Islands does ... Read Full Answer >>
  3. Why is Andorra considered a tax haven?

    Andorra is one of many locations around the globe considered a tax haven because of its relatively lenient tax laws. However, ... Read Full Answer >>
  4. What are the best free online calculators for calculating my taxable income?

    Free online calculators for determining your taxable income are located at, and Determining ... Read Full Answer >>
  5. In what instances does overhead qualify for certain tax allowances?

    Businesses are just as keen as anyone else to keep their tax burdens low by any means possible. Overhead expenses often qualify ... Read Full Answer >>
  6. Is there a situation in which wash trading is legal?

    Wash trading, the intentional practice of manipulating a stock's activity level to deceive other investors, is not a legal ... Read Full Answer >>
Hot Definitions
  1. Ex Works (EXW)

    An international trade term requiring the seller to make goods ready for pickup at his or her own place of business. All ...
  2. Letter of Intent - LOI

    A document outlining the terms of an agreement before it is finalized. LOIs are usually not legally binding in their entirety. ...
  3. Purchasing Power

    The value of a currency expressed in terms of the amount of goods or services that one unit of money can buy. Purchasing ...
  4. Real Estate Investment Trust - REIT

    A REIT is a type of security that invests in real estate through property or mortgages and often trades on major exchanges ...
  5. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  6. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!