The objective of the study was to critically examine the taxation of gift and inheritance in Ethiopia by a grasp lesson from other jurisdictions. Gratuitous transfer of wealth is an important cause for intergenerational wealth disparity and this defeat constitutionally guaranteed fair distribution of wealth and equality of opportunity. Scholars argue that everybody should begin life with fair and equal manner, but inherited wealth offer Unjustified advantage for some over others, this affects the fair head start of individuals. Besides, gratuitous receipts affect an individual’s ability to pay, but our tax law does not treat them as taxable items. Income tax is defective, cannot tax such like gains earned gratuitously. This produce overburdened taxpayer and at the same time free riders. Based on the critical analyses of relevant legislations, literatures and interviews researcher found out that under Ethiopia’s tax system both inheritance and gifts have not been the concern of tax laws and administration yet since, income tax law leave out these items from being income tax base due to this, gratuitous transfers persist escalating economic inequality and drastically affects constitutionally guaranteed equality of opportunity and fair distribution of wealth. Moreover, the study emerges that individuals who receive similar amount or larger amount relive from tax liability for the fact that the source is different but income or benefits derived by personal effort is subject to tax. The study simultaneously reveals that in Ethiopia there are justifiable grounds to separately tax gift and inheritance. The study unveils that all these troubles have tackled by wealth transfer taxes that specifically targeted on gratuitous receipt to discourage gratuitous transfers and reduce the amount received to the extent tax is paid by transfer or or receiver. Therefore, to curb these problems the study recommends Ethiopia to induce estate tax, But legal and practical challenges should solve for instance, jurisdiction should expressly grant to states, restrict capital gains tax on sale and need to establish a competent valuation unit and must in engaging in tax education work to enhance voluntary compliance. Finally, it needs to have comprehensive estate and gift tax law at the state level and the lawmaker