There are certain concepts about Gift Tax rules that you must always keep in mind while preparing your tax return. If you'relucky enough to gift away certain amount of money during your lifetime, you can be subject to the rules of gift tax. After death, your money and property,( which is known as the estate), may also be subject to federal estate tax. But, you can always give away money  during your lifetime or leave certain amounts to your heirs that is tax exempt.

The federal estate tax was eliminated in 2010 under the Economic Growth and Tax Relief Reconciliation Act of 2001 but the gift tax was taxed at the rate of 35%.

At present, the estates valued at $5 million or less are exempt from the tax. Estates worth more than $5 million are taxed at a 35 percent rate. Although there was no estate tax due in 2010 but some heirs had to face very high capital gains taxes on the sale of exempted assets which were recieved as an estate. Now, along with the return of the estate tax in 2011, while calculating capital gains on sale of the asset by the heir, an asset's basis is its fair market value on the day of the original owner's death, this will substantially decrease the amount of capital gain, if any.

Here's just some information for individuals who died in 2010, the estate gets the option of following the 2010 estate tax rules, in other words, no tax is due on the estate, but the carryover basis rule is in effect, or using the 2011 estate tax rules, which include a 35 percent tax on estates worth more than $5 million and the assets basis' is calculated as per the Fair Market Value of the asset on the day of death of the predecessor.

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