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GIFT TAX

Public Chapter 1085, Acts of 2012 repeals Tennessee's gift tax. Tennessee gift tax will not apply to transfers by gift made on or after January 1, 2012. Taxpayers making transfers by gift prior to January 1, 2012 may be subject to Tennessee's gift tax. For these periods, gift tax is imposed on the donor for taxable gifts in excess of the allowable exemptions and exclusions. The following information applies to gifts made prior to January 1, 2012:

I. RETURN DUE DATE The Tennessee gift tax return (Form INH300) is due April 15th of the year following the calendar year in which the gifts were made - (Tenn. Code Ann. Section 67-8101). II. WHO MUST FILE If the value of the total gifts made during the calendar year exceeds the applicable exemption levels, the state gift tax return must be filed for any of the following transfers: 1. Transfer from a resident of this state of: a) Real property situated in Tennessee. b) Tangible personal property - except situated outside of Tennessee. c) Property in which a person holds a qualifying income interest for life (life estate). d) All intangible personal property. III. CLASSIFICATION OF DONEES Class A - Husband, wife, son, daughter, lineal ancestor, lineal descendant, brother, sister, son-in-law, daughter-in-law, or stepchild. If a person has no child or grandchild, a niece or nephew of such person shall be a Class A donee. Class B - Any other relative, person, association, or corporation not specifically designated in Class A.

IV. EXEMPTIONS Class A* A* A* B A&B Date of Gift 2002 through 2005 2006 through 2008 2009 through 2011 Any until January 1, 2012 January 1, 2012 & after Exemption Amount $11,000 per donee $12,000 per donee $13,000 per donee $5,000 exemption; $3,000 per donee Gift tax repealed

* = Exception: In the case of a future interest, only one class exemption of $10,000 is allowed. V. NET GIFTS A. Amount of gifts made during any calendar year, less deductions. B. If the total value of all gifts made by a person during any calendar year does not exceed the exemption levels, no gift tax return is required unless consenting to split gifts with spouse. VI. DEDUCTIONS A. Marital Deduction - Deduction allowed for gifts made to the spouse, provided married to each other at time gifts were made. B. Qualified Terminable Interest Property - Spouse has qualifying income interest for life. C. Charitable Deduction - Gifts made to any organization with a charitable, educational, scientific, or religious purpose (if qualified under Internal Revenue Code 501(c)(3)). VII. GIFTS The valuation of all property real or personal must reflect the full and true value as of date of making the gift. A gift consists of: A. Real Estate B. Stocks and Bonds C. Closely Held Stocks and Partnerships D. Notes and Mortgages Receivable E. Artistic or Intrinsically Valuable Gifts F. Gifts to Trust G. Partial Consideration - (Less than full consideration in money or money's worth) H. Powers of Appointment I. Actuarial Valuation of Future and Limited Estates - Life estate using the mortality table

VIII. GIFT SPLITTING A. Consent of Spouse - Gifts made during the calendar year by the donor and spouse to a third party may be considered as being made one-half by each spouse. This election can be made only if donor and spouse are married at the time of the gift. B. The "Consent of Spouse" part of the gift tax return must be completed in its entirety to perfect the gift splitting election, and each spouse is required to file a gift tax return.

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