gift tax

My inlaws are selling their house in Indiana and wish to give us a gift of the maximum allowable this year of $11,000 each. They do not have a big estate. Are they required to file any gift tax returns and do we have to record this as income on our tax return.

The annual exclusion is $11,000 for each gift given by one person to another person. The exclusion is $22,000 for gifts given by a married couple to another person (for example from your in-laws to you). The exclusion would be $44,000 for gifts given by one married couple to another married couple (for example from your in-laws to you and your spouse).

If the gift is over the annual exclusion, they would have to file a gift tax return, but there would be no tax because they would apply the lifetime exclusion, which in 2002 is $1,000,000 per person, or $2,000,000 per married couple.