[CPASF1]

Why is the gift above $28,000 not taxed? I looked in both the Roger and Wiley books and couldn’t find an explanation for this, thanks!

A husband and wife agree to split monetary gifts to their relatives. The husband gives his daughter $22,500, and the wife gives her niece $19,000. The annual exclusion is $14,000. What amount is the taxable gift for the husband and wife?

A.
$0 (correct)

Incorrect B.
$13,500

C.
$17,000

D.
$37,500

here’s the wiley example:

TP is married to S and this year made a gift of $50,000 to his son. If TP and S elect to gift splitting, the $50,000 gift is treated as two $25,000 gifts to the son, one gift from TP and one from S. Each gift would be eligible for an annual exclusion of $14,000 (2016), so each spouse would have made a taxable gift of $11,000.

[th625]

It would be $28,000 total per person- so the gift to the daughter can be up to 28k without tax, AND the gift to the niece can also be up to 28k without tax. the tax only applies once those limits are exceeded for that particular person. Make sense?

[Finally_a_CPA]

So you understand the $14k annual exclusion right? Any person can give up to $14000 every year without even having to report that as a gift. If a married couple is giving a gift and they agree to split the gift, they can give up to $28k ($14k each) to a single person. So they can give to as many people as they would like as long as they don't go over the 28k and they would not have to report that gift to the IRS.

Now let's assume the couple gives money in excess of the $28, let's say they give $30k to someone. This means they exceeded the exclusion so they have to report the excess, in this case the $2,000. Keep in mind that they are not actually paying any taxes, they are simply reporting the gift of $2000 to the IRS. This is only done to keep track of taxable gifts. When you die and all your assets are transferred to your estate (unless your assets are within a certain amount) then it is important to know how much in taxable gifts you gave through out your life because that will help determine your estate tax.

[ThomasHallberg]

With gift “splitting” each spouse gives 14,000 each to each recipient of the gift. So each gift donor will not be taxed on anything under 28,000 to the gift recipient (if they are gift splitting).

[CPASF1]

so the 28K (married) applies to EACH person, so it's okay if the son gets 28K and anything under and the niece gets 28K and then anything under, then what would happen if say the son (1 person) got 35K?

then that they would be taxed for 7k?

[Finally_a_CPA]

CPASF1: That is correct. As a couple, the 28k applies to each person so they could give 28k to the niece and 28k to the son.

If the son received 35k instead, then they would have to file a gift tax return for the 7k. BUT, they would NOT pay any taxes until they exceed the lifetime gift limit of 5.45 million. Once they reach this limit, then they wpuld pay a gift tax on the entire amount.

[CPASF1]

Thank you so much GSD512, ThomasHallbe rg, th625!

[Author]

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