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. Managing Wealth

    Estate Planning: Estate Taxation

    by Cathy Pareto, CFP®, AIF® (Contact Author | Biography) The estate tax is a type of "death tax", whereby taxes are imposed on the right to transfer or receive property at the property ...
  2. Insights

    Gift-Giving Etiquette

    Here's a look at how much you should spend and what you should give this holiday season.
  3. Personal Finance

    Estate Taxes: Who's on the Hook?

    Inheritance taxes can be tricky. Most people have to deal with them at a very inconvenient time. It's better to learn the laws now so you're ready later.
  4. Financial Advisor

    A Quick Guide to High-Net-Worth Estate Planning

    A quick estate planning guide for high-net-worth individuals to help minimize taxes and costs, protect assets and plan for care.
  5. Personal Finance

    8 States With Estate Taxes

    Understand the difference between the federal estate tax and state-specific estate taxes. Learn about some of the worst states with estate taxes.
  6. Personal Finance

    10 Sources Of Nontaxable Income

    Taxes are often a deterrent from investing and saving. These financial practices will bring you no tax grief.
  7. Personal Finance

    3 Best And Worst Gift Cards For 2012

    Here are the gift cards that offer the best deals and those that aren't worth your money.
  8. Personal Finance

    Will Your Gift Card Gift Go Unused?

    An unbelievable amount of money gets wasted in the form of non-redemption: nearly $5 billion a year. These tips will ensure that your gift card gift doesn't go to waste.
  9. Financial Advisor

    How Life Insurance Can Help Reduce Estate Taxes

    Inheritance is a double-edged sword, as leaving money can create estate tax burdens. Opting for a life insurance plan can help mitigate those burdens.
  10. Financial Advisor

    Surprise! These Items are Taxable

    These are 10 surprising taxable items you need to be aware of if you don't want the IRS knocking on your door.
Trading Center