Gift Form 709

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NavyIC3
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Gift Form 709

Post by NavyIC3 » Sat Feb 09, 2019 10:53 am

Wife and I gave daughter and her husband $200,000. to purchase a house. This would be $100,000 from each of us. We transferred the money from a joint account. We did not write out a check. I know that we can exclude $60,000 for gifts. I know that we each have to file a Form 709. My question: is there a difference between filing with splitting the gift or filing without splitting the gift? Does it make a difference?

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David Jay
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Re: Gift Form 709

Post by David Jay » Sat Feb 09, 2019 12:02 pm

It makes no difference if you do not expect to be near the estate maximum (currently $11M). It is just documentation.

If you DO expect to bump up against the estate maximum, then you need to document the $140,000 in the most beneficial manner. For that amount of money it is probably wise to get professional advice rather than rely on an anonymous Internet forum.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

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NavyIC3
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Re: Gift Form 709

Post by NavyIC3 » Sat Feb 09, 2019 6:29 pm

Thanks David

Leesbro63
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Re: Gift Form 709

Post by Leesbro63 » Sat Feb 09, 2019 6:33 pm

David Jay wrote:
Sat Feb 09, 2019 12:02 pm
It makes no difference if you do not expect to be near the estate maximum (currently $11M). It is just documentation.

If you DO expect to bump up against the estate maximum, then you need to document the $140,000 in the most beneficial manner. For that amount of money it is probably wise to get professional advice rather than rely on an anonymous Internet forum.
I would document this carefully even if not near the $11M estate tax threshold. Because this could change to something much lower. And prior gifts could be counted against any lower estate tax exemption amount.

fabdog
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Re: Gift Form 709

Post by fabdog » Sat Feb 09, 2019 6:34 pm

you'd need to file splitting the gift to take advantage of the max $60K ($15K from each of you to each of them)

The form documents that you made the gift and the $140K is taken out of your estate exemption

Mike

MarkNYC
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Re: Gift Form 709

Post by MarkNYC » Sat Feb 09, 2019 7:03 pm

Gift splitting makes sense only when all or most of the gift comes from one spouse. With a joint account, it will generally be deemed that the gift is 50 percent from each spouse, in which case gift splitting does not accomplish anything.

fourwheelcycle
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Re: Gift Form 709

Post by fourwheelcycle » Sun Feb 10, 2019 10:08 am

Leesbro63 wrote:
Sat Feb 09, 2019 6:33 pm
I would document this carefully even if not near the $11M estate tax threshold. Because this could change to something much lower. And prior gifts could be counted against any lower estate tax exemption amount.
There are two issues here -

1. What happens to your lifetime exclusion if you give some gifts when the exclusion is high and later die when the exclusion is lower?

I have read about this question in various posts and I still don't understand the answer. For example, if my wife and I each submit Forms 709 for $1.25M in gifts over the years, and then we die when a certain political party (ours!) has reduced the exclusion to $1M per person, will our estates still have to pay inheritance tax on $250K in excess estate value for each of us?

2. What "careful" documentation is required to support a gift when a Form 709 is submitted? Is a different, more stringent, level of documentation for the same gift required if a Form 706 is subsequently filed?

We have never submitted any documentation with our Forms 709. We just enter our total current year gifts, subtract the current year exclusion amount, then fill out the part of the form for all past-year Form 709 amounts, and then we submit the forms. The IRS has never asked for any specific documentation. Some gifts have been by a single check on our joint BoA checking account and others have been by a single transfer from our joint Vanguard account; none have been by actual "cash". I assume BoA and Vanguard could show the records going back thirty years or more when we die, but I am not sure this is a good assumption.

I have seen past posts suggesting separate checks for each spouse's gifts, but Form 709 Line 12 pretty clearly indicates you can state the total amount and then say you want to attribute half to each spouse.

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HueyLD
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Re: Gift Form 709

Post by HueyLD » Sun Feb 10, 2019 10:34 am

The IRS has published very useful articles that address your concerns.

For the no clawback, see this link.
https://www.irs.gov/newsroom/estate-and-gift-tax-faqs

For documentation and audit rules, see this link.
https://www.irs.gov/businesses/small-bu ... gift-taxes

fourwheelcycle
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Re: Gift Form 709

Post by fourwheelcycle » Sun Feb 10, 2019 11:23 am

HueyLD wrote:
Sun Feb 10, 2019 10:34 am
The IRS has published very useful articles that address your concerns.

For the no clawback, see this link.
https://www.irs.gov/newsroom/estate-and-gift-tax-faqs

For documentation and audit rules, see this link.
https://www.irs.gov/businesses/small-bu ... gift-taxes
Thanks! I have previously read both of these links and I am still not clear on my two questions.

I think the first link does not represent a final regulation, and I am not clear whether the proposed regulation would apply to all past years or only to gifts made subsequent to the December, 2017 Tax Cuts and Jobs Act. Also, couldn't a future law that reduces the lifetime exclusion also revoke this proposed regulation?

I just reviewed the Form 709 instructions again and I still don't see any mention of required documentation for "plain vanilla" gifts made by check or fixed value share transfers from money market settlement accounts. I do see instructions for documentation of value in the case of gifts of regular stocks, real estate, life insurance interests, etc.

Leesbro63
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Re: Gift Form 709

Post by Leesbro63 » Mon Feb 11, 2019 11:42 am

fourwheelcycle wrote:
Sun Feb 10, 2019 11:23 am
HueyLD wrote:
Sun Feb 10, 2019 10:34 am
The IRS has published very useful articles that address your concerns.

For the no clawback, see this link.
https://www.irs.gov/newsroom/estate-and-gift-tax-faqs

For documentation and audit rules, see this link.
https://www.irs.gov/businesses/small-bu ... gift-taxes
Thanks! I have previously read both of these links and I am still not clear on my two questions.

I think the first link does not represent a final regulation, and I am not clear whether the proposed regulation would apply to all past years or only to gifts made subsequent to the December, 2017 Tax Cuts and Jobs Act. Also, couldn't a future law that reduces the lifetime exclusion also revoke this proposed regulation?

I just reviewed the Form 709 instructions again and I still don't see any mention of required documentation for "plain vanilla" gifts made by check or fixed value share transfers from money market settlement accounts. I do see instructions for documentation of value in the case of gifts of regular stocks, real estate, life insurance interests, etc.
My understanding is that there will be no clawback. But people who have gifted less than $11M (plus inflation from whatever date it was) will only get credit for what was gifted or the current exclusion amount, whichever is less. In other words, if you gifted $8M today, then die in a year when the exclusion reduces to $4M, your $8M is safe from clawback but your entire estate at death will be estate taxable because you've exceeded the new current limit of $4M. The fact that you left $3M on the table (you could have gifted $11M in 2019 but did not), does NOT mean you'll have $3M of estate tax exemption "left over" at death. To sum this up, my understanding is that only those who can gift (or die leaving) a full $11M before any changes (currently scheduled to reduce to have that in 2026) happen are the ones who get the full advantage of the current $11M unified credit.

Back to the issue at hand. The estate tax exemption amount appears to be a fluid issue. Anyone making large gifts would be wise to fully document and comply so that there are no questions if the amount/rules changes in the future.

fourwheelcycle
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Re: Gift Form 709

Post by fourwheelcycle » Mon Feb 11, 2019 1:57 pm

Leesbro63 wrote:
Mon Feb 11, 2019 11:42 am
In other words, if you gifted $8M today, then die in a year when the exclusion reduces to $4M, your $8M is safe from clawback but your entire estate at death will be estate taxable because you've exceeded the new current limit of $4M.
Thanks for your math example - I can follow that easier than a paragraph of regulatory language.

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