Ensign, his mistress and gift taxes

So Nevada Sen. John Ensign's parents helped pay off his girlfriend and her husband. Can this story get any ickier?

Forget I asked
that. Having watched for years politicians do incredibly stupid
things, the answer is yes, it could get more sordid.

In today's
Capitol Hill soap opera installment, we learned that Ensign's folks gave his mistress and her family a total of $96,000.

But before we go any further, here's a quick recap:

• The married Ensign had an affair with Cindy Hampton.
  
• She was a campaign staffer at the time.
• Oh yeah, Cindy also was married when she had the fling.
  
• And oh yeah, her husband, Doug, was Ensign's administrative assistant.

Plus, in true TV daytime drama fashion, the Ensign family and the Hamptons were "longtime friends."

That friendship,
say Ensign apologists, is why the 96 grand that the Hampton
family got from the Senator's family is no big deal.

Hey, where can I get me some friends like that?

Gift tax
exclusion issues: This latest revelation about the Republican
lawmaker's affair also raises an interesting tax issue. Yep, the tax
code was a consideration in Ensign's adultery.

According to the Senator's lawyer, the $96,000 given to Cindy and Doug Hampton and their two kids was done in a way to comply with gift tax laws.

Specifically, the Hamptons got the money in $12,000 increments.

A tax code
provision allows anyone to give anyone else up to a certain amount of money without
causing any immediate tax concerns for the giver. The
Ensigns' $12,000 gifts indicate that they gave the Hamptons the money
in 2008. That was the gift tax exclusion limit last year. For 2009, it
was bumped up to $13,000.

As for the recipients, they don't have to worry about the IRS. Gifts are not taxable.

So Ensign's mom
gave Cindy, Doug and their two kids $12,000 each, totaling $48,000. And
Ensign's dad gave Cindy, Doug and the two kids $12,000 each, totaling
$48,000.

$48,000 + $48,000 = $96,000.

And I thought it was just today's younger parents who clean up after their wayward children way too much.

Gifts and estate tax planning: The gift tax exclusion is a valuable tax planning tool for folks with large estates like, apparently, Sen. Ensign's folks.

If you have
assets that are greater than the federal estate tax exemption (that's
$3.5 million in 2009), you could get your holdings down to or below that figure
by giving away some your assets to family and friends while you're still
around to get their gratitude.

You can continue this munificent process with as
many lucky gift recipients in the allowable annual amounts until your
aggregate gifts reach that previously mentioned $1 million amount.

Once you hit that figure, then you've got some other tax considerations.

Of course, if you
have enough money to be doling out sizable chunks of cash to family,
friends and your child's lover, then you probably have a good tax adviser
and/or attorney on retainer.

If, however, you're like the hubby and me and just want to know more out of curiosity, you can read about estate and gift taxes in these articles from the IRS, Bankrate,  Fairmark and SmartMoney. And this Don't Mess With Taxes item looks at possible estate tax changes (honestly, keep reading past the Michael Jackson stuff) expected later this year.