Gifts Flashcards
What are Gift Taxes based on?
Based on FMV at Date of Gift
Net Gift?
A gift made on the condition that the Donee pay any Gift Tax due
Donor will have taxable income if gift tax paid by donee Exceeds donor’s adjusted basis
When would Donor have Taxable Income on a Net Gift?
If Gift Tax paid by Donee Exceeds donor’s adjusted basis
Non-U.S. Citizen Spouse Annual Exclusion Amount for Gifts?
“Super Annual Exclusion”
= $175,000 (2023)
Split Gifts: Can you cherry pick which gifts use Gift Splitting?
NO
Must be used for ALL Gifts that year if elected
Split Gifts: Can you split gifts for Community Property?
NO
Split Gifts for Year of Death
Surviving Spouse can split the gifts made by decedent in decedent’s final tax year
Spouse must have been married at time of the gift
Surviving spouse can NOT remarry in year in which a split gift with the decedent is desired
Can Surviving Spouse remarry in the year of a Split Gift of Decedent’s Final Tax Year?
NO
Surviving spouse can NOT remarry in year in which a split gift with the decedent is desired
Gifts of a Present Interest?
Unrestricted right to the immediate use of the property
Gifts of a Future Interest?
Interest that’s limited to a future date/time
Donee’s right to the property is contingent upon some future date/time
Can NOT use Annual Gift Tax Exclusion for Future Interest Gift
Example: Remainder beneficiary of a Trust
Example of a Future Interest Gift?
Example: Remainder beneficiary of a Trust
Can you use Annual Gift Tax Exclusion for a Gift of a Future Interest?
NO
Crummey Provision Definition
Creates a Present Interest in a Trust, which then qualifies the contribution to the trust for annual gift exclusion
Allows Trust Bene to withdraw some or all of any contribution to a Trust for a limited period of time to create a Present Interest
Taxable Gifts/Estate Taxes are… Formula for over $1,000,000
Over $1,000,000
=$345,800 + 40% of excess of amount over $1,000,000
Lifetime credit is $12,920,000 (2023)
$12,920,000 - $1M= $11,920,000
($11,920,000 x 40%)=
$4,768,000
=$4,768,000+$345,800
=$5,113,800 Credit amount
Gift Tax Calculation Example: Year 1 Taxable gift of $2,000,000. Year 2 taxable gift of $11,000,000. What’s the tax due for year 1 and year 2?
Year 1: No Tax due (under the lifetime exemption)
Year 2: It’s $80,000 over the lifetime exemption ($11M + $2M previous gift) =$13,000,000 - $12,920,000
=$80,000 over
So $345,800 + 40% of amount over $1M ($13M-$1M=$12M)
$345,800 + 40%x($12M)
=$345,800+$4,800,000
=$5,145,800 (Tentative tax)
LESS $5,113,800 (credit)
= $32,000 Tax Due
