Gift Tax and Splitting with Spouse

[ruthc]

A client has inherited some money. She wants to give $100K to her brother this year. She plans on having his name put on her savings account and just have him take out the $100K out of her account. I mentioned the gift tax return to her along with the max of $15K/yr. I would like to ask if I am missing something after reading the gift tax pub. She is married and so is her brother. Even if she splits the gift giving with her husband for 2019 it will exceed the $15K max. and the gift tax return is required. But if she wanted to..... could she and her spouse gift $15K each to her brother and the same amount to his spouse in 2019 (total $60K). Then gift $10K each in January 2020 to her brother and his spouse ($40K). She would then not have to file any gift return. I am not sure if she and spouse still would be required to do a gift return because she is splitting the gift giving with her spouse. Thanks in advance.........

[TAXNJ]

Ruth kinda combined two things. 1.) "If she and her spouse could give $15K each..." No splitting required if EACH gives $15K. No gift tax return. 2.) "If he agrees to split." That implies that she gives $30K from her account, and he agrees to split. Two gift tax returns required to split her $30K gift into two $15K gifts.

Well summarized. At this point and earlier reply posts refer others to review The Tax Book section for “gifts” and/or applicable IRS code.

Need to be careful of reply posts not providing a reference.

This post can now be archived since Original Poster made a final decision.

[Lion]

Ruth kinda combined two things. 1.) "If she and her spouse could give $15K each..." No splitting required if EACH gives $15K. No gift tax return. 2.) "If he agrees to split." That implies that she gives $30K from her account, and he agrees to split. Two gift tax returns required to split her $30K gift into two $15K gifts.

[Dusty2004]

Ruth said: "I thought an option could be: she and her spouse (if he agrees to split) could give $15K each to her brother and his spouse in 2019 (total equals $60K). Then give $10K each in 2020 (total equals $40K). I didn't think she would have to do a return, but I may be wrong because of the splitting."

You understand it correctly. If both husband and wife agree to give the money away they can give a married couple a total of $60,000 made out to the recipient and their spouse and not have to file a gift tax return. It is the same as give 4 checks for $15,000.

Dusty

[ruthc]

There is no big deal about doing the form return at all !!!!!!! Never said there was. I stated that I am suggesting to her to just pay her brother the $100K and be done with it. Then the return is going to be done. I wasn't going to respond anymore, but as posters wrote, I figured I would respond out of courtesy. AMEN!!!!

[New York Enrolled Agent]

I don't get it - what's the big deal about filing a 709 form? It's simple to do - does everything right for the taxpayer. Ruth could have completed the form(s) in less time than she spent reading all these posts.

BTW, funding a 529 plan with $75K still requires filing a Form 709.

[Dude]

It would be appropriate to ask TP if her brother had outstanding medical bills or tuition, if so, the gift tax issue is negated. Maybe brother has a tuition expenses for his child. In that case sister could also fund a 529 with $75k, spread it over five years. Her spouse could then gift the remaining 15K or she could finagle a combination of any of the above.

[Lion]

Please read TTB explanations cited above. TTB explains things well.

[ruthc]

If all the funds come from your client and are over the gift exclusion amount and she has a spouse willing to gift split, then they both file gift tax returns. If they sort this out before gifting to your client's brother, then client can give some now and spouse can give now and repeat next year. Or whatever amounts and timing can meet their needs. But, it is possible NOT to be required to file gift tax returns.

Yes, the money was inherited by the daughter from her father. She wants to give a total of $100K. I thought an option could be: she and her spouse (if he agrees to split) could give $15K each to her brother and his spouse in 2019 (total equals $60K). Then give $10K each in 2020 (total equals $40K). I didn't think she would have to do a return, but I may be wrong because of the splitting.
After reading the comments of everyone, I think the best option (which I spoke to her about) would just be to give a check for $100K and do a gift return seeing she will never be at the max to have to pay any gift tax.

[Lion]

If all the funds come from your client and are over the gift exclusion amount and she has a spouse willing to gift split, then they both file gift tax returns. If they sort this out before gifting to your client's brother, then client can give some now and spouse can give now and repeat next year. Or whatever amounts and timing can meet their needs. But, it is possible NOT to be required to file gift tax returns.

[ruthc]

You don't say how much is in the account she is putting his name on. BAD IDEA! It would be subject to any liabilities, lawsuits, claims, etc, etc for him for the entire amount in the account. PS: The scenario you proposed in the OP re: gift-splitting would work just fine. I am assuming the spouse's name is not on the account? So he would have to use funds in his name for gift-splitting......

Burke, I don't know how much is in the account right now, but I will certainly find that out along with explaining the dangers of doing it. If she didn't use the savings account method, and If she did the gift-splitting with her spouse using 2019 and 2020 (less than the max per year) both spouses would still have to do a return because they are gift-splitting, right?

[Burke]

Exactly what I needed to explain to her seeing I think she already added her brother to the account but didn't give him any out of the account yet.
.

You don't say how much is in the account she is putting his name on. BAD IDEA! It would be subject to any liabilities, lawsuits, claims, etc, etc for him for the entire amount in the account. PS: The scenario you proposed in the OP re: gift-splitting would work just fine. I am assuming the spouse's name is not on the account? So he would have to use funds in his name for gift-splitting......

[ruthc]

Do not know of a "1040 Edition Plus" rather a "1040 Edition" and a "Deluxe Edition PLUS" !!!!

see The TaxBook link below for the differences and how it may benefit your future research

https://www.thetaxbook.com/book_1040.asp

TaxNJ....... I ordered and received the "1040 Plus Edition" along with the "What's New in-Depth" for 2018. I have not looked at the 2019 editions yet. If the titles changed for 2019 I will be ordering what is available for my needs. Thanks for the info.

[TAXNJ]

Unfortunately, I don't have that section in my TaxBook. I have the 1040 Edition Plus. I did read the section on splitting in the IRS Pub for gifts.

Lion, she is not adding her son to the savings account. It is her brother.

Do not know of a "1040 Edition Plus" rather a "1040 Edition" and a "Deluxe Edition PLUS" !!!!

see The TaxBook link below for the differences and how it may benefit your future research

https://www.thetaxbook.com/book_1040.asp

[ruthc]

Lion - to answer your question - the addition of the name does not create a gift - the gift is determined when the brother would access the money for his benefit.

Here is a snip from Reg. §25.2511-1

(4) If A creates a joint bank account for himself and B (or a similar type of ownership by which A can regain the entire fund without B's consent), there is a gift to B when B draws upon the account for his own benefit, to the extent of the amount drawn without any obligation to account for a part of the proceeds to A. Similarly, if A purchases a United States savings bond registered as payable to "A or B," there is a gift to B when B surrenders the bond for cash without any obligation to account for a part of the proceeds to A.

Thank you very much NY Enrolled Agent. I did read the reference you supplied. Exactly what I needed to explain to her seeing I think she already added her brother to the account but didn't give him any out of the account yet. Same result no matter how she gives the money to him. She needs a gift return. I am going to suggest just doing a check for the $100,000 without splitting with spouse seeing she will never reach the amount that she will have to pay any tax.

Thank you everyone else that took the time to enlighten me on gift giving.