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Is gift tax return required?


Possi

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My client inherited his Dad's house. Just my client. 

He wanted to be fair to his siblings, so he split the sale of the house. 

Siblings did not officially inherit it, just my client. 

I told him we would have to file a gift tax return, as these gifts were $27,800, $33,000 and $38,000. 

I'm right, RIGHT?

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I would too.  If your client is married, he can elect gift splitting with his spouse and eliminate the gift tax on the $27800 gift.  If the other two siblings are married and your client elects gift splitting with his spouse, he could effectively eliminate all the gift taxes.   He could also use up part of his unified credit that would show the taxable gift, offset with the credit, and still eliminate any gift tax owed without doing any gift splitting at all.  He has options!

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6 minutes ago, jklcpa said:

I would too.  If your client is married, he can elect gift splitting with his spouse and eliminate the gift tax on the $27800 gift.  If the other two siblings are married and your client elects gift splitting with his spouse, he could effectively eliminate all the gift taxes.   He could also use up part of his unified credit that would show the taxable gift, offset with the credit, and still eliminate any gift tax owed without doing any gift splitting at all.  He has options!

I didn't expect him to owe gift tax. He is all done with gifts after this house is split. 

Also, are you saying we don't have to file the 709 if he gift splits with his own wife as a gift-er along with him, to the other siblings provided they are married? I didn't think about that because his wife didn't inherit the house. 

If we do the gift splitting, is there no IRS documentation required as far as a tax return? This could set me FREE today! 

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From your post, is the gift actually a split of only cash since you said the house was solely in his name?    Or did he voluntarily spread the inheritance of the house to include his siblings?
 

If he sold the house in his name alone and gave cash gifts, then he must file gift tax returns.  The gift splitting is done on the gift returns as is the use of unified credit.

If he elected to split the inheritance of the house by including the siblings in the ownership of the house, that is not a gift. That is him as a beneficiary voluntarily sharing the asset with others.

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5 minutes ago, jklcpa said:

From your post, is the gift actually a split of only cash since you said the house was solely in his name?    Or did he voluntarily spread the inheritance of the house to include his siblings?
 

If he sold the house in his name alone and gave cash gifts, then he must file gift tax returns.  The gift splitting is done on the gift returns as is the use of unified credit.

If he elected to split the inheritance of the house by including the siblings in the ownership of the house, that is not a gift. That is him as a beneficiary voluntarily sharing the asset with others.

HMMMMMMM Well, it was only his name on the house, but he voluntarily shared the sale of the house. 

He wrote checks, so it looks like he files the gift tax return. 

And I thought it would be easy. I'm going to put this down until my office is closed and I have time to focus. 

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I think with gift splitting, both spouses would have to file a gift tax return and sign off on the other's return.  Can't file a joint gift tax return.  If siblings are married, he can divide that sibling's gift to his spouse.  Either way, there should be no tax with the lifetime credit.

 

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Don't bother with the gift splitting--that gets complicated just showing each spouse where to sign one another's and their own return.  Unless your client is likely to have gifts and a residual estate in excess of $23 million, he is in no danger of ever owing gift and estate taxes.  So file a single return for him and be done with it.  Better check the state though--some have much lower thresholds than the feds.

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I think everyone has been clear enough, but I'll offer an example.  The exemptions are multiples of $15,000 and if not exceeded, no requirement exists for the donor:

  • Dad gives son a $50,000 gift.  Exemption is $15,000, so gift tax return of $35,000 is required.  The money comes off Dad's estate tax return when he passes, and unless estate is valued over $23 million, no tax would ever calculated.
  • Son is married and Dad thinks their marriage is stable, so he gives son and daughter-in-law a $50,000 gift.  Exemption is now doubled at $30,000, and gift tax return of $20,000 is required.
  • Son is married and Dad and Mom BOTH give $25,000 to the son and $25,000 to daughter-in-law to complete their intended gift of $50,000.  Exemption is now $60,000, exceeding the $50,000 in gifts.  No gift tax or other disclosure is required.

 

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