When to File a Gift Tax Return

Only individuals can file a gift tax return and no joint returns can be filed. A return is required if any of the following situations are applicable in a calendar year:
1. You gave more than $13,000 to any individual other than your spouse. Direct payments of another person's medical or tuition costs are not considered gifts and don't have to be considered regardless of the amount.
2. You and your spouse together gave more than $26,000 to anyone.
3. You gave more than $136,000 to a non citizen spouse.

Gifts can be stock, cash, debt forgiveness, and below market sales.
A taxable gift reduces your lifetime exclusion of $5.12 million (2012). No gift tax is due unless you exceed this amount so it is generally just a reporting  exercise with no tax payments required.

Estate Tax Return

There are some expenses only deductible on an estate tax return form 706. You can't deduct them on the final form 1040 or the estate income tax return form 1041. They include funeral expenses, claims against the estate, and the tax due on the final form 1040.

LLC's and the Self Employment Tax

The answer is clear if you are a passive member, your share of the profit is not subject to self employment tax. Otherwise, there is uncertainty in the tax code, and as a managing member of an LLC you may be subject to the tax. You may want to pay yourself a reasonable guaranteed payment subject to the tax for your services in that situation.

LLC or SUB S

An LLC is more flexible than a Sub S corporation because any entity can be a member, there can be different classes of stock, there can be any number of members, and the profits can be allocated to the members in any way. A Sub S corporation has one great advantage though. You can save on payroll taxes because any profits above a reasonable salary for the owner escapes self employment taxes. Not so in an LLC where all profits are generally subject to self employment taxes.

Business Gifts

Deductions for business gifts are limited to $25 per person per year. The costs of engraving, mailing, and gift wrapping are not included in the limit. This is a very low limit and has not been updated for inflation for a very long time. Sometimes it is more appropriate to deduct a gift as entertainment such as tickets to a sporting event, but then you can only deduct 50%.