Annual Exclusion/ Lifetime Exclusion
What is the annual exclusion amount per donee in 2019?
$15,000
Steve and Kay Briar, U.S. Citizens, were married for the entire calendar year. During the year, Steve gave a $32,000 cash gift to his sister. The Briars made no other gifts in the year. They each signed a timely election to treat the $32,000 gift as made one-half by each spouse. What amount of the current year gift is a taxable gift?
$2,000 Taxable Gift
Name 3 different ways our clients make gifts
-Cash, Stock, Gift to Trust, Loan forgiveness, Below Market Loans, Property, 529 Plans, etc.
True of False: Estate Tax is inclusive, while Gift Tax is exclusive
True -
•Estate tax is inclusive – based on the entire estate, including assets that will be used to pay estate tax.
•Gift tax is exclusive – based on the value of the asset being transferred.
What two things should you do when your gift tax return has been extended?
1. Check box on Line 709 to confirm extension was filed.
2. Attach a copy of the 1040 extension voucher.
What is the lifetime exclusion in 2019 for a married couple?
$22,800,000
During the current year, Joe, an unmarried U.S. citizen, made a $5,000 cash gift to an only child and also paid $25,000 in tuition expenses directly to a grandchild's university on the grandchild's behalf. Joe made no other lifetime transfers. Assume the gift tax annual exclusion is $15,000. For gift tax purposes, what was Joe's taxable gift?
$0
What are some gifts that are excluded from Gift Tax?
1. Spousal Gifts
2. Charitable Gifts
3. Tuition - paid directly to qualifying educational org.
4. Medical Expenses - paid directly to a provider on behalf of another.
5. Political Contributions
6. Support - necessities of life
What is the only state that imposes a gift tax?
Connecticut
On July 1, 2019 Vicky made a transfer by gift in an amount sufficient to require the filing of Form 709. If Vicky did not request an extension of time for filing the Year 2018 gift tax return, what is the due date?
April 15, 2019.
If Vicky had extended, the due date would be October 15th, 2019. Form 709 follows the same due dates as 1040's.
True of False: Gifts made in Excess of the annual exclusion reduce your federal estate tax exemption when you die?
True
This year, Beck gave $5,000 cash to a nephew, canceled $3,000 of the same nephew’s indebtedness, donated $1,500 to a political party, and gave $1,200 of municipal bonds to a parent. What is the amount of Beck’s gifts before considering the gift tax annual exclusion?
$9,200
=5,000+3,000+1,200
Where does gift income get reported on a 1040?
It does not get reported on the 1040, IRC §102, a gift is not taxable income
True of False: Filing Form 709 will start the three year statute of limitations clock.
True - Provided that there is adequate disclosure on Form 709, the three-year statute of limitations will begin to run.
True of False: Gifts made over 10 years ago and properly reported by a donor are not considered when determining a donor's current year gift tax liability.
False - Prior taxable gifts are taken into account when determining a donor's gift tax liability. A prior gift will be included in the computation if it was made after June 6, 1932, which includes almost all gifts made today.
In the current year, Paul, who is single gave an outright gift of $50,000 to a friend, Johnson, who needed the money to pay medical expenses. In filing the current year gift tax return, what amount of maximum annual exclusion was Paul entitled to?
$15,000
In 2018, Dan made a gift of stock worth $400,000 to his son. Dan and his wife, Jean, have elected to split the gift. After deducting the annual exclusion, what is Jean's taxable gift?
$185,000
Name at least two things to consider in electing to split gifts
Spouses must be legally married at time gift was made.
Both spouses must be U.S. citizens
Both spouses must file a return, and sign their own as well as the other's return
If election to split is made, ALL gifts made in the year must be split
What is the biggest advantage of Crummey powers?
Converts a future interest gift into a present interest gift.
There are two checkbox's at the beginning of Schedule A. What is their purpose?
(Name at least one, and if you get both your team receives +100 bonus points)
1. Schedule A, Line A - Valuation Discounts
2. Schedule A, Line B - Accelerated Funding of 529 Plans
Hal and Jodi both made annual exclusion gifts to Hal's parents, Tom and June. What was the total amount of annual exclusion used by both Hal and Jodie?
$60,000
Tom: receives $15,000 from Hal / $15,000 from Jodi
June: receives $15,000 from Hal / $15,000 from Jodi
When Jim and Nina became engaged in April of the current year, Jim gave Nina a ring that had a FMV of $50,000. After their wedding in July that same year, Jim gave Nina $75,000 in cash so that Nina could have her own bank account. Both Jim and Nina are U.S. citizens. What was the amount of Jim's current year marital deduction?
$75,000.
The $50,000 transfer prior to marriage was not subject to the marital deduction. It would be reportable as a gift and be eligible for the $15,000 annual gift tax exclusion.
What does GST Tax Stand for?
(Team receives +100 bonus points if you can define what GST Tax is)
Generation-Skipping Transfer tax.
GST Tax - A separate tax in addition to the estate and gift taxes.
It is imposed on US taxable gifts and bequests made to or for the benefit of persons who are two or more generations below that of the donor, such as a grandchild. It is also imposed on gifts made to donees who are not related to the donor and who are more than 37.5 years younger than the donor.
What is Portability?
Portability is transferring a deceased spouse's unused exclusion (DSUE) amount to the surviving spouse.
Name three of the four Schedules in Form 709
Schedule A: Computation of Taxable Gifts
Schedule B: Gifts from Prior Periods
Schedule C: Deceased Spousal Unused Exclusion (DSUE) Amount and Restored Exclusion
Schedule D: Computation of Generation Skipping Transfer Tax