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Tax Tip of the Week
For the week of
December 2, 2002

Time is running out for making 2002 tax-free gifts

You have only until the end of December to make tax-free gifts for 2002. Each year you can make gifts up to a certain dollar limit to an unlimited number of people free of any gift tax. For 2002, the dollar limit per recipient is $11,000. For example, if you have two children, you could give each of them $11,000 before the end of December. Your spouse could make similar gifts, allowing you to transfer a total of $44,000 to your children free of gift tax.

Why would you want to make tax-free gifts? There are a number of possible reasons. Tax-free gifts are often used in estate planning as a way of steadily reducing the value of a taxable estate during the owner's lifetime. Another strategy is to transfer income-producing assets to children or other family members who are in a lower tax bracket. The recipients pay taxes on investment earnings or capital gains at their lower rates, resulting in a net tax savings for the family.

Keep in mind that you have only until December 31 to make use of your 2002 exclusion. To count as a 2002 gift, the transaction must be completed by year-end. On January 1, 2003, you can begin making 2003 gifts of up to $11,000 per recipient.

Check with us to determine whether tax-free gifts are a good idea in your situation.

Prior Tax TipsClick here to view previous tax tips.

"Tax Tips" are published weekly to provide useful tax information. Return to this site every week for helpful tax-cutting suggestions, tax reminders, and current tax information.

The information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.

If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax-cutting information from time to time, please contact our office. We're here to help.

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