If you've given away a million worth of taxable gifts, at death you'll have only a million left to give away.

Grandson, however, will ultimately receive a taxable gift when the money in the trust passes to him.

The agency's reasoning is that people might use such guarantees to avoid making taxable gifts to children.

The federal gift tax is computed based on cumulative taxable gifts, and is reduced by prior gift taxes paid.

The federal estate tax is computed on the sum of taxable estate and taxable gifts, and is reduced by prior gift taxes paid.

That is a change from six years ago, when the I.R.S. said that 85 percent of large taxable gifts it audited shortchanged the government.

The I.R.S. said then that it would hire three more lawyers just to audit taxable gifts of $1 million or more.

The I.R.S., in a quasi-authoritative letter ruling that has stunned specialists, says such guarantees are taxable gifts.

Consequently, if the retained interest is valued at zero, the taxable gift equals the fair market value of the residence.

Generally, the following gifts are not taxable gifts: