Gift tax exemption applies to a limit per calendar year.

• A. Calendar year
• B. Financial year
• C. Tax year
• D. Fiscal year

Answer: (A)

The amount you can give without triggering gift tax is measured over a calendar year, and that limit resets every January 1. In other words, you have a fresh allowance each calendar year per recipient, regardless of other kinds of years used for accounting or tax reporting. The terms financial year, tax year, or fiscal year refer to different 12-month periods used for budgeting or taxation, but they do not govern the gift tax annual exclusion. So the correct interpretation is that the exemption applies per calendar year. For example, if the limit is $X, you can give up to $X to the same person within this calendar year without tax, and a new amount applies in the next calendar year.