Annual Gift Exclusion

[Snaggletooth]

C'mon Jainen - I know you're out there.

For purposes of this example, "taxable" means the taxable amount can be applied against the unified credit (if available).

Daddy and Momma give Daughter and Son-in-Law $48,000 in 2006. No other gifts were given in 2006. Which of the following is true?

A. This transaction has an exclusion of $12,000, and the donor couple must file a gift tax return declaring $36,000 as taxable.
B. Daddy and Momma are EACH entitled to a $12,000 exclusion and should file separate gift tax returns. $24,000 is taxable, $12,000 from each.
C. The older couple can exclude $12,000 given to the daughter and $12,000 given to the son-in-law, therefore there is a $24,000 exemption and $24,000 taxable.
D. Daddy and Momma are EACH entitled to a $12,000 exclusion for daughter AND for son-in-law. By filing separate returns, the entire $48,000 can be excluded.

[jainen]

Watcha pickin'

>>C'mon Jainen - I know you're out there.<<

Watcha pickin' on me for? I already made the latest post before yours. Besides, I don't like multiple choice. It stifles my creativity, and then when some rebel points out the real answer I have to admit it was starin' me in the face the whole time.

And besides that, I don't even think they oughta give the bum all that money. Let him get a real job if he wants their daughter. Oh well, these little pseudo-polls seem to be pretty popular with the forum so I vote for all-of-the-above. Ummm, not A, but all the rest. It depends on how they structure it, especially whose money it is and whether they do gift splitting.

[Snaggletooth]

Typical

Typical of Jainen, and I should have known better. Try to appeal to his tax knowledge, and you get this didactic on some great cosmic truth. Thanks anyway.

At any rate, the question is not whether Jainen is popular, or whether he can walk with Kings yet keep the common touch. Anyone else out there wanna try this one? If you don't like multiple choice, the objective is to squeeze as much gift exclusion out of a $48,000 transfer as you can, and to specify how you do it.

--"Did you write the book of Love and do you have faith in God above"-- Don McLean

[Gene V]

Let this old airline employee fly in here, the answer in my opinion would be D. each of the couple may give $12,000 to each person, without filing a gift tax return. Therefore, the total $48,000 would not require a gift tax return. (If they did have to file form 709, they would each file there own 709—they cannot file a joint form 709 as you have stated)..

[natiro]

gift exclusion

Mom and Dad can each gift 12,000 to any number of people they want to. So in this case, Mom can gift 12,000 to daughter and 12,000 to son-in-law. Dad can do the same. Because there are no other gifts in excess of the 12,000 to each person, they do not have to file Form 709.

D is the closest answer, except they don't have to file the gift tax return to report the gifts.

[Snaggletooth]

Thanks

to Gene V and Natiro. Certainly wasn't a difficult question and thanks for a definitive, straightforward answer. I was 99% sure this was correct.

Spent some time reading about this in the Tax Book, which I just received today. It's not possible for TTB (or any publication) to describe every possible situation that you CAN'T do, so I drew a blank.

[New York Enrolled Agent]

Snags

The question may not be as easily answered as one might think. First, a couple of your choices imply the taxpayers can file a joint gift tax return. There is no such thing as a joint gift return. Married couples can split gifts but (depending on the amount involved) that would require two separate 709 Forms.

The second concern is how the $48K was "delivered" to the recipients. There is a difference, for example, if Dad wrote one check for 48K as opposed to Dad writing 2 $12K checks and Mom writing 2 $12K checks or other possible variations. If it was the former, then two gift tax returns using split gifts would be required to avoid using any of the one million lifetime exclusion. If it was the latter, then no returns would be required. Other variations of delivery might adjust this answer.

[natiro]

I agree

I agree with NYEA. I had assumed they each wrote separate checks to the recipients but I realize you didn't actually state that in your question.

[jainen]

cosmic truth

>>I agree with NYEA. I had assumed they each wrote separate checks to the recipients but I realize you didn't actually state that in your question.<<

Not to sound jealous, but do you also agree with jainen, who said, "It depends on how they structure it, especially whose money it is and whether they do gift splitting."? Or was that just a "didactic on some great cosmic truth"?

[Snaggletooth]

Nature of the Question

I appreciate everyone's response and have been questioned as to why the multiple choice answers were structured the way they were. Here are some elements of the thinking.

1. I knew some of the selections were wrong before they were fashioned. For example, I knew there was no such thing as a "joint" gift tax return. However, this just means that the selection is wrong and in all honesty they were intentionally wrong when the choice was parlayed. Realize that if there are four choices and only one right choice, then three of them have to be wrong. The reference to a joint gift return doesn't make the selection "wronger than wrong." Throughout academia we have all been exposed to multiple choice questions that the author knew was wrong when the questions were created.

2. Some have wondered why the query was portrayed in the format of multiple choice to begin with when a direct question could have been asked. Jainen has effectively said he doesn't like multiple choice because it restricts his thinking, a.k.a. forces his mind into some sort of pigeon-hole. My reasons for structuring multiple choice (and I've done a good bit of this lately) are simple -- I get ONE answer. I don't get answers which are all over the map, and there is less likelihood for the discussion thread to morph into something off-subject. The answer focuses on only one of the choices, even though there may be disagreement as to which of the choices is correct.

The sad result of asking simply asking a question is that you don't get a direct answer. Not all questions have direct answers but this is not what I'm complaining about. You get things like "I don't know why you're asking that question" or "Your client should never have let himself get in that bad shape" or "Your question should be something else" and thinking very deviant to the problem. The grand champion was when I asked whether the sales tax deduction legislation had been passed (an absolutely critical question to those of us who prepare taxes), and Jainen responded that it didn't matter because Congress was forcing the Treasury to borrow too much money from China.

If you've read this far, you've read a very lengthy post, mostly about protocol approach and somewhat about courtesy. I'm very thankful that on this message board there are so many knowledgeable people who have been able to help lesser-knowledgeable people like myself. After years of limiting my practice to tax preparation, I have found it necessary to embark into the elements of estate and gift taxes, and you simply can't pack all this knowledge into a section of TTB.

Best regards, Ron Jordan

[jainen]

I'm flattered

I'm flattered. Be careful, though--even I don't believe everything I write. In fact, you may have noticed that the moderator is making me add a disclaimer to many of my posts.

Well, I just want to set the record straight. On the first of last month, when you asked about the sales tax deduction, my response had nothing to do with China. What I actually said was, "Which form do we use to claim the credit for downloading MP3 files?"

[Snaggletooth]

MP3 Files

Thank you my friend - After all, MP3 files were so much more relevant than China...

Have a good Christmas Jainen....

[BP.]

grand champ

Jainen gets a grand champion prize in the category of “Posts that are not direct answers to the question,” and the award-winning post was not even a response to the question asked. Boy, he makes it look easy! That award was a slum-dunk, Snag!