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Here are several Internal Revenue Service documents concerning gifts:
"Form 709: United States Gift (and Generation-Skipping Transfer) Tax Return: 2005"
"2005 Instructions for Form 709"
"Publication 950 (Rev. September 2006) Cat. No. 14447X: Introduction
to Estate and Gift Taxes"
"Gift Tax Questions"
"Estate and Gift Taxes"
The last of these documents says in part:
"If you gave any one person gifts in 2005 that valued at more than
$11,000, you must report the total gifts to the Internal Revenue
Service and may have to pay tax on the gifts.
The person who receives your gift does not have to report the gift to
the IRS or pay gift or income tax on its value.
Gifts include money and property, including the use of property
without expecting to receive something of equal value in return. If
you sell something at less than its value or make an interest-free or
reduced-interest loan, you may be making a gift.
There are some exceptions to the tax rules on gifts. The following
gifts do not count against the annual limit:
? Tuition or Medical Expenses that you pay directly to an educational
or medical institution for someone's benefit ...."
The other documents provide further statements about reporting gifts
over $11,000 to one person, the exception for tuition that you pay
directly to an educational institution for someone's benefit, and
non-reporting of gifts by the person who receives the gift.
Please let me know if you need clarification of this answer.
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