Terry D EA Posted February 17, 2017 Report Share Posted February 17, 2017 New client referred to me presented me with a "Gift Letter" indicating a gift given to his daughter and son-in law in the amount of 100K. This transaction took place on 12/28/2015. The client did not file a gift tax return. I should recommend he file a gift tax return for 2015. Will the IRS penalize for this late filing? If I understand correctly, the tax liability on this transaction would be due at the date of the client's death if the total of all gifts given exceeds the 5.45 million exclusion. Am I correct here? Quote Link to comment Share on other sites More sharing options...
Ringers Posted February 17, 2017 Report Share Posted February 17, 2017 Terry, There is no penalty for filing a gift tax return late if no amount is owed with the return itself. You are correct in stating that he should file the return, even though it is late, and that the gift will not trigger any immediate tax, it will just reduce his lifetime unified credit on the $5.45M of taxable estate exclusion. 4 Quote Link to comment Share on other sites More sharing options...
Terry D EA Posted February 17, 2017 Author Report Share Posted February 17, 2017 That's what I thought. Thank you Quote Link to comment Share on other sites More sharing options...
Lion EA Posted February 17, 2017 Report Share Posted February 17, 2017 If he reaches the then-limit while alive, he will owe tax with that year's gift tax return plus any subsequent returns. You don't wait until after he dies to pay tax, just until he reaches the limit. I think. None of my clients have given that much away, so I haven't had to look that up lately. 1 Quote Link to comment Share on other sites More sharing options...
Catherine Posted February 17, 2017 Report Share Posted February 17, 2017 I believe the gift limit is still $1,000,000 Quote Link to comment Share on other sites More sharing options...
Jack from Ohio Posted February 17, 2017 Report Share Posted February 17, 2017 2 hours ago, Catherine said: I believe the gift limit is still $1,000,000 It’s official—for 2016, the estate and gift tax exemption is $5.45 million per individual, up from $5.43 million in 2015. That means an individual can leave $5.45 million to heirs and pay no federal estate or gift tax. A married couple will be able to shield $10.9 million from federal estate and gift taxes. The annual gift exclusion remains the same at $14,000. The federal estate and gift tax exemptions rise with inflation, and the IRS announced the new numbers here. We cover the 2016 retirement plan contribution limits here and the new numbers for individual income tax provisions for 2016 here. The inflation bump up matters to wealthy folks who try to whittle down their estates to keep below the threshold, which was as low as $2 million in 2008, $1 million in 2003 and $675,000 in 2001. The estate and gift tax exemption amount was set at $5 million in 2011, indexed for inflation. The top federal estate tax rate is 40%. http://www.forbes.com/sites/ashleaebeling/2015/10/22/irs-announces-2016-estate-and-gift-tax-limits-the-10-9-million-tax-break/#836648899fa5 2 Quote Link to comment Share on other sites More sharing options...
jklcpa Posted February 17, 2017 Report Share Posted February 17, 2017 The unified credit is $5.49 million for 2017. Quote Link to comment Share on other sites More sharing options...
michaelmars Posted February 18, 2017 Report Share Posted February 18, 2017 SOME states have gift taxes too Quote Link to comment Share on other sites More sharing options...
Terry D EA Posted February 21, 2017 Author Report Share Posted February 21, 2017 Thanks I'm looking into that as well. Quote Link to comment Share on other sites More sharing options...
Terry D EA Posted February 21, 2017 Author Report Share Posted February 21, 2017 Just looked at NC and MA for gift tax. Neither State has a gift tax. MA, however, does have a one time 1,000,000 exclusion and then the estate tax kicks in. So, for my client, no State gift tax. Thanks to all who replied. It sure is a great thing to have you folks here. 2 Quote Link to comment Share on other sites More sharing options...
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