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Since 1932 the gift tax law has contained an annual per-donee exclusion,
designed to "obviate the necessity of keeping an account of and reporting
numerous small gifts."' At its inception the exclusion was fixed at 5,000
dollars per donee per year--"sufficiently large to cover in most cases wedding
and Christmas gifts and occasional gifts of relatively small amounts."
The 5,000 dollar allowance was in effect for the period 1932-1938; but because this amount was regarded as unreasonably large "in view of the frequency with which donors are induced by the exemption to build up estates of considerable size for the members of their families," the exclusion was reduced to 4,000 dollars for the period 1939-1942. In 1942, noting once again that the exclusion enabled donors to distribute large amounts of property free not only of gift tax but of estate tax as well, but acknowledging that "administrative difficulties" prevented abolition of the exclusion, Congress reduced the amount to 3,000 dollars. In 1981 this amount was increased to 10,000 dollars for post-1981 gifts to reflect the reduced purchasing power of the dollar. The dollar amounts applicable to earlier years, however, continue to control when gifts are cumulated over the taxpayer's lifetime in making the tentative tax computations required by Internal Revenue Code (IRC) section 2502(a).
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