Regarding the formula for the Federal gift tax (see Figure 27.1), comment on the following observations.
a. All prior gifts must be considered in determining the tax on a current gift.
b. A credit is allowed for the gift taxes actually paid on prior gifts.
c. The annual exclusion is adjusted each year for inflation.
d. The charitable and marital deductions play an important role.
e. Some gratuitous transfers might not be subject to the gift tax.

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FIGURE 27. Gift Tax Formula Determine whether the transfers are considered gifts by referring to §§ 2 511 through 2519; list the fair market value of only the covered transfers Claim the a Determine the charitable and marital deductions Taxable gifts [as defined by $ 2503 (a)] for the current period Add: Taxable gifts from prior years Total of current and past taxable gifts Compute the gift tax on the total of aurrent and past taxable nnual exclusion ($14,000 per donee) as avai available xxxxx S xx,xxx S xx,xxx $ x,xxx (ox) gifts by using the rates in Appendix A Subtract: Gift tax paid or deemed paid on past taxable gifts and the unified tax cre dit Gift tax due on transfers during the aurrent period