Property, money or assets that one person transfers to another while receiving nothing or less than fair market value in return. Under certain circumstances, the IRS collects a tax on gifts. Transfers of money or property that are given freely or exchanged for less than market value may be subject to the gift tax if the donor has exceeded the annual or lifetime gift exemption.

If you receive a gift, you aren't required to report it as income; it is the gift giver who is responsible for paying any tax and filing a gift tax return. Gifts of any amount to spouses, political organizations, and payments of tuition and medical expenses on behalf of others are generally not taxable as gifts. Estate planning can help wealthy individuals avoid paying gift taxes.