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:

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