giving/receiving gifts

[Carphunter]

i understand your point..., but playing devil's advocate... if you can give a way 13k per year to multiple bodies, it would seem you could hand out a lot of cash on the sly.

Like I said.. I'm trying to get a handle on all this so when I discuss it with a family member, I have a clue what I'm talking about.

[disneysteve]

i understand your point..., but playing devil's advocate... if you can give a way 13k per year to multiple bodies, it would seem you could hand out a lot of cash on the sly.

True, but not having the exemption could even mean something like paying your kid's college tuition would become a taxable gift. Pick up the tab when you go out to dinner with friends and you'd have to report it on your taxes. Basically, any money you give to anyone for any reason would become a taxable event if not for the exemption.

[Carphunter]

Well, I think I'm up to speed now on the topic... now I'm in to nitty gritty.

I know a couple can give 26k to a party. I'm having a hard time reading the 709 instructions and understanding....

The 709 instruction state that husband and wife must file their own 709's. Am I right to infer, though, as long as they haven't given more than 26k as a couple (13k a piece) to a receipient, they don't have to file the 709 at all since they didn't cross the threshold?

Reading the 709 instructions...it seems the basic rule is, if you don't give more than 13k to someone, you don't have to fill out a 709.

[disneysteve]

Am I right to infer, though, as long as they haven't given more than 26k as a couple (13k a piece) to a receipient, they don't have to file the 709 at all since they didn't cross the threshold?

Reading the 709 instructions...it seems the basic rule is, if you don't give more than 13k to someone, you don't have to fill out a 709.

That's correct. You only have to file for gifts over 13K/person/year.

[jpg7n16]

i understand your point..., but playing devil's advocate... if you can give a way 13k per year to multiple bodies, it would seem you could hand out a lot of cash on the sly.

Yes you could. It's your money, why can't you give it to whoever you want? In fact, if you are looking to get rid of everything you own, and you want to give it to lots of people - you should hand out a lot of cash The 13k rule just prevents someone from giving someone else too much as a way to avoid the estate tax rules.

True, but not having the exemption could even mean something like paying your kid's college tuition would become a taxable gift. Pick up the tab when you go out to dinner with friends and you'd have to report it on your taxes. Basically, any money you give to anyone for any reason would become a taxable event if not for the exemption.

Technically, payments directly to the institution for tution are not considered gifts and aren't limited to the 13k rule. You can pay $150k or more directly to a single institution in one year for one student and not have any gift taxes.

The same applies to medical bills directly to a hospital. I can give the hospital all the money I own gift tax free, but I can't give you over 13k for you to pay your medical bills w/o worrying about taxes.

The rest of what you said is absolutely true - and an administrative nightmare.

I know a couple can give 26k to a party. I'm having a hard time reading the 709 instructions and understanding....

The 709 instruction state that husband and wife must file their own 709's. Am I right to infer, though, as long as they haven't given more than 26k as a couple (13k a piece) to a receipient, they don't have to file the 709 at all since they didn't cross the threshold?

Not necessarily. Because not all states are community property states when it comes to which spouse has ownership of the property that was gifted. If I was married and gave $25k from my own personal separate bank account in a non community property state, I would still need to file a 709 for documentation of my spouse's agreement to split my 25k gift. Even though none of it was her property. Plus see quote from page 6 below.

The other thing to remember is, if you split one gift - you split them all. That's why the couple must both file 709s.

Reading the 709 instructions...it seems the basic rule is, if you don't give more than 13k to someone, you don't have to fill out a 709.

Yup. Don't waste their time putting it on the form, cause it won't be taxed anyways, so who cares?

From page 6 of the 709 instructions:
"If the total is $13,000 or less, you need not enter on Schedule A any gifts (except gifts of future interests) that you made to that donee...

Gift Splitting Elected. Enter on Schedule A the entire value of every gift you made during the calendar year while you were married, even if the gift's value will be less than $13,000 after it is split in Column G"

What that means to you is - if you gave less than 13k don't worry about it. If you split gifts, and the total gifts to that one person was more than 13k, you have to report it - even though once it is split it may be less than 13k per spouse.

[Carphunter]

Gift Splitting Elected. Enter on Schedule A the entire value of every gift you made during the calendar year while you were married, even if the gift's value will be less than $13,000 after it is split in Column G"

What that means to you is - if you gave less than 13k don't worry about it. If you split gifts, and the total gifts to that one person was more than 13k, you have to report it - even though once it is split it may be less than 13k per spouse.

Ok... that's what confuses me. If a couple splits gifts... and they give someone 26K or less, they haven't given more than 13k a piece... but they still report it... right? so they now have to do a 709 each.

If they each hand over a check for 13k to the recipient, instead of one check for 26k... they don't have to file the 709?

[disneysteve]

Technically, payments directly to the institution for tution are not considered gifts and aren't limited to the 13k rule.

The same applies to medical bills directly to a hospital. I can give the hospital all the money I own gift tax free, but I can't give you over 13k for you to pay your medical bills w/o worrying about taxes.

Yes, I should have specified that. It would only be a gift if you give the money to the individual to use to pay their tuition or medical bill (and exceeded the 13K). But without the exemption, it would have been a taxable event when my parents put money in my bank account while I was away in college so that I could then withdraw it from the ATM on campus to buy books or food or whatever.

[jpg7n16]

Ok... that's what confuses me. If a couple splits gifts... and they give someone 26K or less, they haven't given more than 13k a piece... but they still report it... right? so they now have to do a 709 each.

If they each hand over a check for 13k to the recipient, instead of one check for 26k... they don't have to file the 709?

Kind of. If the property given was joint property, it is already split.

The main thing to remember is that you file the 709 to report splitting of what would otherwise be a taxable gift.

If they each gave 13k of their own funds - there's no need for a 709 as there is no taxable gift by either party. If they gave 26k of joint funds (Either 1 check for $26k or 2 checks for 13k each - from Mr. and Mrs. X joint bank account) it is assumed that they each gifted half - again 13k and 13k for no taxable gifts by either party.

If Mr. X gives $26k of separate property (from Mr. X only bank account), now he is in a situation that would normally be a taxable gift event. In order to avoid tax liability, he can get consent from his spouse to split this gift (of his own property) and would need to file from 709 to document her consent.

But if you give 13k of your personal funds, and your spouse gives a 13k check from a joint account - you have now given 13k + 6.5k = 19.5k which puts you in a taxable gift situation - and you would need to file a 709.


So take all personal property given over the year to one individual plus 1/2 of all joint property (with spouse) given to the same individual. If that puts you over the 13k limit, file a 709.

Did I just make this really confusing??

[jpg7n16]

I've been lookin for links all over the place on this hah here's a few I found:

TurboTax® - The Gift Tax

Publication 950 (12/2009), Introduction to Estate and Gift Taxes

and "What if my spouse and I want to give away property that we own together?
You are each entitled to the annual exclusion amount on the gift. Together, you can give $22,000 to each donee (2002-2005) or $24,000 (2006-2008), $26,000 (effective on or after January 1, 2009)."
from: Frequently Asked Questions on Gift Taxes