gifting from non spouse

Submitted by Douglas Bauerband on Tue, 2018-08-28 19:05

clients are not married.

The husband has an account of 40k he wants to give to her.

He can gift 15k in 2018 and 15k in Jan of 2019

that leaves 10k left in the account.

questions:
a. can he gift the other 11k to her and he has to file a form with the IRS correct (which form)?

b. would it be a problem to gift the whole 40k this year instead or would that cause a problem?

Thank you,
Douglas



Submitted by Alan - IRA critic on Tue, 2018-08-28 20:13

If he cannot limit the gifts to 15k each year, he will have to file a 709 for each year he exceeds 15k.  He will not owe taxes, but his available exclusion will be reduced by the amount in excess of 15k per year. Therefore, if he gave all 40 this year, he will have to file the 709 for this year only, and his available exclusion will be reduced by  25. If he gives 20k this year and the rest in January, he will have to file a 709 each year, but his exclusion will only be reduced by 10k since he will use two years of 15k exclusions.  Since his lifetime exclusion is around 5.5mm, a reduction of a few thousand means little since most people will not get anywhere close to 5.5mm at death.

Submitted by Douglas Bauerband on Tue, 2018-08-28 21:10

give 40k this year and files 709. exlusion would then be 25k.  In 2019 does the exclusion reduce by another 15k and go down to 10 and then no exclusion if goes into 2020?

Submitted by Alan - IRA critic on Tue, 2018-08-28 22:54

  • With a 40k gift this year, the annual exclusion would be 15k, and 25k would be the amount that his remaining total exemption would be reduced.  Correcting my post above, the 2018 total estate and gift exemption per TCJA is 11,180,000 per person, therefore a 25k taxable gift would only reduce that to 11,155,000. That limit continues to be adjusted by inflation annually.
  • If the gift made was 15k this year, no 709 needed this year. If the 25k balance was gifted in 2019, then the 15k annual exclusion could be used for a second year, leaving only a 10k taxable gift and reduction of the inflation adjusted 11,180,000 exemption at death.

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