709 form basic questions
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709 form basic questions
First time doing a 709 form and made it to page 9 of instructions. Doing a split gift with my wife so I know we each fill out a form. I have 3 questions so far.
1)we are giving our son a total of 50% of a house, so I assume on schedule A if the basis is $120k and value is $230K (g) column (h) would be $115 and (i)would be $115. The problem would be with my wife’s form it would add up to the total of $230K and look like we are gifting 100% of the house. So do I need to already reduce (e) and (g) 50% since (h) is set at 1/2 on the form.
2)I believe we each fill out a consent form and attach with our spouse, mine goes with hers and hers goes with mine
3)the instructions say I need to list/show all charitable contributions even though they are not part of this calculation, do they mean things like The Salvation Army, Tunnels to Towers etc even if its all less than $1k.
1)we are giving our son a total of 50% of a house, so I assume on schedule A if the basis is $120k and value is $230K (g) column (h) would be $115 and (i)would be $115. The problem would be with my wife’s form it would add up to the total of $230K and look like we are gifting 100% of the house. So do I need to already reduce (e) and (g) 50% since (h) is set at 1/2 on the form.
2)I believe we each fill out a consent form and attach with our spouse, mine goes with hers and hers goes with mine
3)the instructions say I need to list/show all charitable contributions even though they are not part of this calculation, do they mean things like The Salvation Army, Tunnels to Towers etc even if its all less than $1k.
Re: 709 form basic questions
You stated "we are giving my son..." So the first question is who owned the house and actually made the gift? (1) Did you own the house 100% such that the gift was made by you and you're electing gift-splitting to treat the gift as made 50% by you and 50% by your spouse, or (2) was the house owned jointly by both spouses in which case the IRS will consider the gift as having been made 50% by each spouse, making the gift-splitting election unnecessary and serving no purpose?
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Re: 709 form basic questions
My wife and I owned the house 100% and we gifted 50% of it to our son. The new deed gives him 50% and my wife and I each have 25%. So we owned it jointly so I thought we had to file as gift splitting with separate forms. If I don’t have to do two forms that is great. Does that then eliminate having to list all charitable gifts?
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Re: 709 form basic questions
That's not what gift splitting is. Gift splitting is one person making a gift of their own property and electing to have half consider to come from the spouse who did not own that property.SCretired12 wrote: Mon Feb 03, 2025 4:47 pm My wife and I owned the house 100% and we gifted 50% of it to our son. The new deed gives him 50% and my wife and I each have 25%. So we owned it jointly so I thought we had to file as gift splitting with separate forms. If I don’t have to do two forms that is great. Does that then eliminate having to list all charitable gifts?
To your second question, no. You have to list all charitable gifts if you made a non-charitable gift that requires filing the form.
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Re: 709 form basic questions
Thanks for the responses, I will fill out the form without the split and will add charitable contributions. Hopefully I can sleep now because the IRS instructions were giving me some serious headaches. My basic college accounting courses from Ohio University back in the 70’s did not help.
Re: 709 form basic questions
709 is just so freaking confusing. And, there is little in the way of examples on the net to find. Wife and I added some money to a down-payment to a house our child was buying. I treated it as a split gift from wife and I....half from me and half from wife and two 709's. I mailed the in and never heard a peep from the IRS. Now, whether or not I did it right I don't know, but I figure even if it isn't technically correct the intent is clear.
Re: 709 form basic questions
Unless the co-owner is a famous actor or actress the value of a 25% interest in the house may not be equal to 25% of the value of the house. Ask a broker whether he/she could easily sell a 25% interest in the house,
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Re: 709 form basic questions
The purpose was to keep anyone (son) selling without our consent, we own 50% combined and he owns 50%.
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Re: 709 form basic questions
I suspect unless line 19 or 20 (tax owed/refund claimed) are something other than zero, nobody even looks at the rest of the form.twh wrote: Mon Feb 03, 2025 8:08 pm 709 is just so freaking confusing. And, there is little in the way of examples on the net to find. Wife and I added some money to a down-payment to a house our child was buying. I treated it as a split gift from wife and I....half from me and half from wife and two 709's. I mailed the in and never heard a peep from the IRS. Now, whether or not I did it right I don't know, but I figure even if it isn't technically correct the intent is clear.
Re: 709 form basic questions
On a similar thread I’m discussing my wife and I gifting land to our daughter. We are joint owners of the land and as such will not be gift splitting rather each will be gifting half and each filling out a 709. We will be attaching a formal appraisal for fair market value. My question, do I list half of the fair market value on my form and wife the other half on hers so that the total of both our submissions equal the fair market value?
- WoodSpinner
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Re: 709 form basic questions
OP,
We hit a similar frustration level a few years back….
Had some help and advice (along with samples) in this thread:
viewtopic.php?t=279436
WoodSpinner
We hit a similar frustration level a few years back….
Had some help and advice (along with samples) in this thread:
viewtopic.php?t=279436
WoodSpinner
WoodSpinner
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Re: 709 form basic questions
Does this create a loophole where you could gift half your house to each of your two children and claim a marketability discount for each gift?bsteiner wrote: Mon Feb 03, 2025 10:21 pm Unless the co-owner is a famous actor or actress the value of a 25% interest in the house may not be equal to 25% of the value of the house. Ask a broker whether he/she could easily sell a 25% interest in the house,
Re: 709 form basic questions
I'm not sure whether it's a loophole, but under Revenue Ruling 93-12 the IRS conceded that the discount applies even if the donees are related.toddthebod wrote: Wed Feb 05, 2025 9:27 amDoes this create a loophole where you could gift half your house to each of your two children and claim a marketability discount for each gift?bsteiner wrote: Mon Feb 03, 2025 10:21 pm Unless the co-owner is a famous actor or actress the value of a 25% interest in the house may not be equal to 25% of the value of the house. Ask a broker whether he/she could easily sell a 25% interest in the house,
However, if you give away your house but continue to live in it, it will still be included in your estate. You won't be taxed twice -- the gift won't count against your estate tax exclusion amount.
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Re: 709 form basic questions
I decided to go ahead and do give splitting where both spouses submit the 709, it only adds 5 minutes because the information is identical excepts switching names. My question is regarding Schedule A (e)Donors adjusted basis of gift and (g)value at date pf gift. Assuming the total cost basis was $120,000 of the house but I am only giving 25% and my wife is giving 25% would we each put $30,000 since that’s 25%, each put $60,000 which is what we each would have if its joint owned or do they want $120,000 which is the total cost basis of the house. (g) asks for Value at date of gift (it doesn’t say Donor’s value) so do they want 25% of the value, 50% or the total value which is appraised at $245,000. I can not find any clarification in publications or on line.
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Re: 709 form basic questions
I used special Form 709 software a few years ago. Clunky, but got the job done https://www.puritas-springs.com/product ... x-form-709
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Re: 709 form basic questions
I saw that on line a few days ago but there were no reviews on the product or company so I passed at the time. Unbelievable that the IRS doesn’t have software available for this available for consumers.
- typical.investor
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Re: 709 form basic questions
If I understand your question correctly, it seems as if it'd be the value of the gift the donor is giving. The instructions note that:SCretired12 wrote: Wed Feb 05, 2025 12:45 pm I decided to go ahead and do give splitting where both spouses submit the 709, it only adds 5 minutes because the information is identical excepts switching names. My question is regarding Schedule A (e)Donors adjusted basis of gift and (g)value at date pf gift. Assuming the total cost basis was $120,000 of the house but I am only giving 25% and my wife is giving 25% would we each put $30,000 since that’s 25%, each put $60,000 which is what we each would have if its joint owned or do they want $120,000 which is the total cost basis of the house. (g) asks for Value at date of gift (it doesn’t say Donor’s value) so do they want 25% of the value, 50% or the total value which is appraised at $245,000. I can not find any clarification in publications or on line.
You are submitting two forms so clearly it is 25% of the house value for each donor (as you are retaining 50% correct). 50%/2 = 25%If you have chosen to split gifts, that one-half portion of the gift is entered in column G.
The confusing part for me is knowing where I last submitted it. It's not on the form itself and I didn't scan the addressed envelope. Anyway, you might make a note of that if you might have to submit another one.
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Re: 709 form basic questions
The IRS doesn't seem to care if you file form 709 unless you end up with a taxable estate, and anyone with a taxable estate should have their attorney filling out the form.SCretired12 wrote: Thu Feb 06, 2025 12:30 pm I saw that on line a few days ago but there were no reviews on the product or company so I passed at the time. Unbelievable that the IRS doesn’t have software available for this available for consumers.
Do you know what the penalty is for not filing form 709? I suggest you look it up before you get top stressed.
- typical.investor
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Re: 709 form basic questions
While I agree there is no need for stress, I would advise to file the form. Nobody knows what the lifetime exemption will be in the future or what the penalties may be for not filing. I mean the penalty is a percentage of the gift for every month it was not filed. Maybe you will be lucky and penalties will only occur from the time you actually owe a gift tax. Or maybe the threshold will drop and the IRS will try to penalize from the time of gift. Look at solo 401(k) plans and late fees on filing the 5500. Aren't they so high because basically it was seen as an opportunity to raise revenue?toddthebod wrote: Thu Feb 06, 2025 1:10 pmThe IRS doesn't seem to care if you file form 709 unless you end up with a taxable estate, and anyone with a taxable estate should have their attorney filling out the form.SCretired12 wrote: Thu Feb 06, 2025 12:30 pm I saw that on line a few days ago but there were no reviews on the product or company so I passed at the time. Unbelievable that the IRS doesn’t have software available for this available for consumers.
Do you know what the penalty is for not filing form 709? I suggest you look it up before you get top stressed.
I don't think anyone should just assume that since they are currently under the lifetime exclusion amount that there is no need to file.
My forms may be wrong, but they are on time and any errors are certainly not willful. My defense will certainly be 'reasonable cause" and that I exercised ordinary business care and prudence in reporting my proper tax liability in good faith. According to the IRS, the most significant factor in determining whether a taxpayer has reasonable cause and acted in good faith is his or her efforts to report the proper tax liability. And I understand that unlike the taxpayer defense of "reasonable basis," reasonable cause does not depend on the legal authority behind the position taken on the return. So yeah, I have nothing at all to worry about I think.
Better for me to file now, than leave it for the representative handling my estate especially if rules change and my estate becomes taxable or the penalties for filing get enforced to raise revenue.
Re: 709 form basic questions
It's not clearly 25% of the value of the house for each. Nor is it 25% of the value of the house for either. Unless one of the other owners is a famous actor or actress or model or possibly a famous athlete, it wouldn't be easy for to find a buyer willing to pay 25% of the value of the house for a 25% interest in the house.typical.investor wrote: Thu Feb 06, 2025 12:51 pm ...
You are submitting two forms so clearly it is 25% of the house value for each donor (as you are retaining 50% correct). 50%/2 = 25%
...
The IRS conceded this issue in Revenue Ruling 93-12.
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Re: 709 form basic questions
The penalty is a percentage of the tax due, not a percentage of the gift, an important distinction.typical.investor wrote: Thu Feb 06, 2025 2:24 pmWhile I agree there is no need for stress, I would advise to file the form. Nobody knows what the lifetime exemption will be in the future or what the penalties may be for not filing. I mean the penalty is a percentage of the gift for every month it was not filed. Maybe you will be lucky and penalties will only occur from the time you actually owe a gift tax. Or maybe the threshold will drop and the IRS will try to penalize from the time of gift. Look at solo 401(k) plans and late fees on filing the 5500. Aren't they so high because basically it was seen as an opportunity to raise revenue?toddthebod wrote: Thu Feb 06, 2025 1:10 pm
The IRS doesn't seem to care if you file form 709 unless you end up with a taxable estate, and anyone with a taxable estate should have their attorney filling out the form.
Do you know what the penalty is for not filing form 709? I suggest you look it up before you get top stressed.
There is, therefore, no penalty for failing to file or for filing late. Should you end up having a taxable estate, there would be no problem with filing the missing form at that time.
It seems just as reasonable to me to leave a record that a gift was made without the proper form being filed as it is to leave a record that the form was filed possibly decades prior to your death. (Bruce has shared before the difficulty estate attorneys often encounter in finding copies of old gift returns.)
Regardless, I'm not saying not to file, I'm suggesting just do your best based on the instructions and move on with your life. I certainly wouldn't purchase software or hire an attorney to file a one-time form for a $100,000 gift if my estate were 10% of the lifetime exemption.
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Re: 709 form basic questions
You are free to interpret Revenue Ruling 93-12 how you wish.bsteiner wrote: Thu Feb 06, 2025 3:11 pmIt's not clearly 25% of the value of the house for each. Nor is it 25% of the value of the house for either. Unless one of the other owners is a famous actor or actress or model or possibly a famous athlete, it wouldn't be easy for to find a buyer willing to pay 25% of the value of the house for a 25% interest in the house.typical.investor wrote: Thu Feb 06, 2025 12:51 pm ...
You are submitting two forms so clearly it is 25% of the house value for each donor (as you are retaining 50% correct). 50%/2 = 25%
...
The IRS conceded this issue in Revenue Ruling 93-12.
Personally, I would not follow your advice because:
1) the discount would not make a difference in terms of whether or not I would be likely to have to pay a gift tax, and it would be easier to not require an explanation of the discount if asked
and
2) 93-12 dealt with a gift of shares and discounted based on minority ownership.
You are free to extrapolate, if you wish, that the ruling would hold true for property as well, but I believe Section 25.2512-1 of the Gift Tax Regulations deals with property whereas Section 25.2512-2 deals with stocks and bond and that it is Section 25.2512-2(f) provides that the degree ofRev. Rul. 93-12
ISSUE
If a donor transfers shares in a corporation to each of the donor's
children, is the factor of corporate control in the family to be
considered in valuing each transferred interest, for purposes of
section 2512 of the Internal Revenue Code?
control of the business represented by the block of stock to be valued is among the factors to be considered in valuing stock where there are no sales prices or bona fide bid or asked prices.
I am less convinced than you that the ruling deals with property and as such, would not want to complicate my filing without a clearer indication that 93-12 applies. Perhaps that is a risk you advise people to take based on perceived benefit, but I like to be more conservative. I wouldn't be able to make the case that it's reasonable to view our house as a family owned business and claim that's why I concluded 93-12 applies, but maybe I just lack imagination.
Last edited by typical.investor on Thu Feb 06, 2025 4:19 pm, edited 3 times in total.
- typical.investor
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Re: 709 form basic questions
Say what you will.toddthebod wrote: Thu Feb 06, 2025 3:36 pmThe penalty is a percentage of the tax due, not a percentage of the gift, an important distinction.typical.investor wrote: Thu Feb 06, 2025 2:24 pm
While I agree there is no need for stress, I would advise to file the form. Nobody knows what the lifetime exemption will be in the future or what the penalties may be for not filing. I mean the penalty is a percentage of the gift for every month it was not filed. Maybe you will be lucky and penalties will only occur from the time you actually owe a gift tax. Or maybe the threshold will drop and the IRS will try to penalize from the time of gift. Look at solo 401(k) plans and late fees on filing the 5500. Aren't they so high because basically it was seen as an opportunity to raise revenue?
There is, therefore, no penalty for failing to file or for filing late.
The IRS warns with a CAUTION! icon:
They also say:To begin the running of the statute of limitations for a gift, the gift must be adequately disclosed on Form 709 (or
an attached statement) filed for the year of the gift.
And finally:Late filing and late payment. Section 6651 imposes penalties for both late filing and late payment, unless there is reasonable cause for the delay.
I am not saying that the IRS is currently imposing penalties for unfiled or late 709 forms as I don't really know what they are doing, and I am just saying that filing on time could avoid possible future headaches should someone decide to try an monetize things as done with the 5500.Generally, you must file Form 709 no earlier than January 1,but not later than April 15, of the year after the gift was made.
Re: 709 form basic questions
The classic case for a fractional interest discount is Propstra v. United States, 680 F.2d 1248 (9th Cir. 1982): https://scholar.google.com/scholar_case ... =4,114,129, which allowed a 15% discount for the decedent's interest in real estate held as community property. Other cases have also allowed discounts for fractional interests in real estate. That issue is long settled, though taxpayers and the IRS sometimes disagree as to the amount of the discount. That's a subject for another day.typical.investor wrote: Thu Feb 06, 2025 3:53 pm ...
You are free to extrapolate, if you wish, that the ruling [Revenue Ruling 93-12] would hold true for property as well, but I believe Section 25.2512-1 of the Gift Tax Regulations deals with property whereas Section 25.2512-2 deals with stocks and bond and that it is Section 25.2512-2(f) provides that the degree of control of the business represented by the block of stock to be valued is among the factors to be considered in valuing stock where there are no sales prices or bona fide bid or asked prices.
I am less convinced than you that the ruling deals with property and as such, would not want to complicate my filing without a clearer indication that 93-12 applies. ...
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Re: 709 form basic questions
Thanks for taking your time to post that citation.bsteiner wrote: Thu Feb 06, 2025 4:58 pmThe classic case for a fractional interest discount is Propstra v. United States, 680 F.2d 1248 (9th Cir. 1982): https://scholar.google.com/scholar_case ... =4,114,129, which allowed a 15% discount for the decedent's interest in real estate held as community property. Other cases have also allowed discounts for fractional interests in real estate. That issue is long settled, though taxpayers and the IRS sometimes disagree as to the amount of the discount. That's a subject for another day.typical.investor wrote: Thu Feb 06, 2025 3:53 pm ...
You are free to extrapolate, if you wish, that the ruling [Revenue Ruling 93-12] would hold true for property as well, but I believe Section 25.2512-1 of the Gift Tax Regulations deals with property whereas Section 25.2512-2 deals with stocks and bond and that it is Section 25.2512-2(f) provides that the degree of control of the business represented by the block of stock to be valued is among the factors to be considered in valuing stock where there are no sales prices or bona fide bid or asked prices.
I am less convinced than you that the ruling deals with property and as such, would not want to complicate my filing without a clearer indication that 93-12 applies. ...
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Re: 709 form basic questions
We are not trying to find a buyer and we are not famous actors, this split of ownership is entirely driven by our county assessor office. My son has lived in the house for many years but it was in a revocable trust. They would not accept it to get the same rate as if he we actually a part owner. The tax was $4,200 a year, by giving him 50% (he was eventually going to get the house) the tax dropped to $1,500 a year. We made our investment back if it was sold. My grandson lives there 50% of the time with my son. My son could never afford to have his own home without our help. Nothing is ever as simple as it may appear may appear in a blog.