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US Fed Tax: I am trying to understand difference between Estate Exclusion Amount and Lifetime Gift Exclusion Amount

When I google "irs lifetime gift tax exemption 2023", I get this result from https://smartasset.com/estate-planning/gift-tax-explained-2021-exemption-and-rates

That's because the IRS allows you to give away up to $18,000 in 2024 and $17,000 in 2023 in money or property to as many people as you like each year. The government also exempts $13.61 million in 2024 and $12.92 million in 2023 in gifts from tax over a person's lifetime.

But I cannot find this type of explanation in irs.gov

When I search I get, https://www.irs.gov/instructions/i709#en_US_2023_publink1000292380 and it gives this table:

Table of Basic Exclusion and Credit Amounts (as Recalculated for 2023 Rates)

Where does it say these amounts are limits of gifts given in lifetime rather than from an Estate at a person's death.

Where does it say it is legal for someone to give $12-something million to an individual within a given year ONLY once and not be taxed for giving this $12-something million gift.

Please guide

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The Estate Exclusion Amount and the Lifetime Gift Exclusion Amount are the same amount. Whatever you use during your lifetime is counted under the lifetime gift exclusion amount, and what's left is allowed against your estate.

What's adding to your confusion is the separate $18K per donor per donee exclusion. These 18K doesn't count against the lifetime gift exclusion amount, if your total gifts to the same person throughout the year is less than 18K. It just isn't reported anywhere or counted anywhere, it's a freebie.

Where does it say it is legal for someone to give $12-something million to an individual within a given year ONLY once and not be taxed for giving this $12-something million gift.

That's not to an individual in a given year, the lifetime exclusion is on all your gifts to all your donees, in total. You'll be filing the gift tax return (form 709) to track how much you've used up.

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  • hello @littleadv so the exclusion is for all people, not for one individual. I am trying to understand if person A gives person B $12-something million as a gift in one year and says, this is what I will give in a lifetime, then will $12-something million minus $18K be taxed? I am somewhat clear, but still need some guidance. Thank you.
    – Marium
    Dec 17, 2023 at 1:55
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    If person A had never ever given any gifts above the annual per person exclusion limit (the 18k), then gives 12M to person B, the 12M would be covered by the exclusion. However, next time person A gives $18000.01 or more gift to anyone, he'll need to pay gift tax on the whole amount, there's no "minus $18K". When person A dies, his estate will have to pay taxes on its full value.
    – littleadv
    Dec 17, 2023 at 2:05
  • ok, your answer make sense. My next question is, does person A have to declare "hey, I gave 12M as lifetime gift, don't tax me". What form is this?
    – Marium
    Dec 17, 2023 at 2:38
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    That would be form 709.
    – littleadv
    Dec 17, 2023 at 2:59
  • ahhhh, so in form 709 person A has to say, "hey I gave $12M this year to person B, this is my lifetime gift, please don't tax this"
    – Marium
    Dec 17, 2023 at 3:07

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