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WHEN IS A GIFT COMPLETED?

December 27, 2007

So far in our 2007 year-end tax planning series, we've talked about things you have to do for year end. We haven't really talked that much about exactly how you get some things done.

20071227-1.jpgOne area where getting something done by year-end is critical is the gift tax area. If you fail to use your $12,000 per-donor, per-donee annual exclusion for 2007, it is lost forever. That means you have to make sure you complete your annual exclusion gifts before the clock strikes 12:00 January 1.

The check has to clear to complete the gift. If you write a check for a $12,000 gift on December 31, 2007, but the recipient doesn't cash it until January 2008, it is a 2008 gift. The IRS says a check isn't a completed gift until it is cashed.

So if you want to give somebody a check as your year-end gift, you'll want to give them a cashier's check before year-end. The tax law calls that a completed gift because there you can't stop payment on a cashier's check.

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