When you give somebody a large cash gift, you pay the taxes on the gift. The receiving party owes nothing.
Thanks for clarifying that. I did a little research on this, and I believe this is the case whenever the "giver" of the gift decides to file a form with the IRS identifying it specifically as a gift -- thereby allowing him to apply whatever exemptions he would be permitted ($11,000 as of now) against his total estate for future estate tax purposes.