Gift Taxes Explained – are they really tax free?
The gift tax is a tax on the transfer of property by one individual to another while receiving nothing or less than full value in return.
For Example, Father gave gifts to his daughter $600,000, for which she pays father $100,000. Then $500,000 (600,000 – 100,000) is considered a gift. Payments exceeding the legal obligation for transferring money to a given person is always a gift in the eye of the IRS, except for transferring money to a spouse.
2. When does the tax apply?
The Gift tax applies to transfers made while a person is living. The generation-skipping transfer tax is an additional tax on a transfer of property that skips a generation.
Whole Story at TFX.