The federal wealth transfer tax system generally taxes all gratuitous transfers in the same manner without regard to whether a particular transfer is made during the transferor's lifetime or upon the transferor's death. A fundamental difference between these two taxes is that the gift tax is calculated on a "tax-exclusive" basis (i.e. on the value of property actually transferred) while the estate tax is calculated on a "tax-inclusive" basis (i.e. on the value of property actually transferred plus any amount used to pay the tax). This difference in the calculation of the gift and estate taxes can be significant.

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