ASK KIM
Get Around the Gift Tax
by Kimberly Lankford

My wife and I want to give a house worth $140,000 to our adult son. Can we use part of our gift-tax credit and owe no tax at the time of the gift?

You and your wife can each give up to $11,000 to any number of people each year without triggering the federal gift tax. So the first $22,000 of your gift will be tax-free, leaving a balance of $118,000.

Each of you also has a $345,800 credit -- enough to offset the tax on the first $1 million of lifetime taxable gifts. Assuming you jointly own the home, each of you will be giving a taxable gift of $59,000 to your son.

You'll each need to file a federal gift-tax return, on which you'll figure the tax bill -- $12,760 in this case -- and use that much of your credit to cover the bill.

Even though no money changes hands now, giving the gift could have consequences later because the part of the gift-tax credit you use up won't be available to offset estate taxes when you die. So the $59,000 might be taxed later rather than sooner.

But that all depends on when you die and what rules are in place at that time. Under current law, the estate tax is gradually being phased out. It's supposed to disappear in 2010, then reappear in 2011.