Final answer:
Current taxable gifts are the value of current gifts minus the annual exclusion amount. However, neither the lifetime exemption, the gift tax on prior gifts, nor the gift tax due on the current gift reduces the value of current taxable gifts.
Step-by-step explanation:
Current taxable gifts are calculated by subtracting certain amounts from the total value of gifts given in a year. Specifically, current gifts are reduced by the annual exclusion amount to determine the current taxable gifts. The annual exclusion permits a person to give away a certain amount of money to as many people as they wish each year without it being subject to gift tax. This applies to individual recipients, and it does not reduce the lifetime exemption. The lifetime exemption is separate and involves a much larger total that applies over the course of one's lifetime, beyond which estate and gift taxes are owed. Additionally, the amount of gift tax paid on prior gifts does not reduce the current taxable gifts because it relates to past transactions. Lastly, the amount of gift tax that is due on the current gift is a consequence of the current gift's taxable value and does not serve to reduce the taxable amount itself.