The
purpose of this post is to advise you that you may be required to file a
Federal gift tax return (IRS Form 709). If you made a gift during 2016, the
below summary may be critical to your tax planning.
The
due date for a 2016 gift tax return is April 18, 2017, the same due date as
your 2016 individual income tax return. This date can be extended by extending
the time to file your individual income tax return using Form 4868 or Form
2350. This due date can also be extended by filing a Form 8892 to request an
automatic 6-month extension if you do not request an extension for your
individual income tax return. However, neither of these methods will extend the
time to pay gift or GST taxes due.
Outright
Gifts of Cash or Property
All
gifts of cash or property (in excess of $14,000) to an individual other than a
spouse require a gift tax return. As a result of the gift, your lifetime estate
and gift tax exemption ($5,450,000 in 2016) will be reduced by the value of the
gift that exceeds the $14,000. However, no gift tax will be due with the return
unless you have fully used your lifetime estate and gift tax exemption.
Gifts
of Cash or Property in Trust
When
you gift cash or property to a trust, including a life insurance policy (or
premium payments to be made on a life insurance policy), you are making a gift
to the trust=s
beneficiaries. If the gift to the trust=s
beneficiaries does not exceed $14,000 per beneficiary, and Crummey notices are
properly used, a gift tax return may not be required unless the trust is
structured as a generation-skipping transfer (AGST@) tax trust. If a gift
is made to a GST trust, it may be advisable to allocate the donor=s GST exemption to the
trust. While this allocation is automatic, it is advisable to either opt out of
the automatic allocation rules for record keeping purposes, or, file a return
showing the allocation of the GST Exemption. If a gift to a trust exceeds $14,000
per beneficiary, a gift tax return is required to be filed.
Most
CPA’s are willing and able to prepare gift tax returns. However, many prefer
not to due to the complex rules that apply to the allocation of GST exemption
and other special disclosures. Due to such complexities, we prefer to review
all gift tax returns prepared by our client’s accountants to ensure they align
with your estate planning goals.
If
you have gifted cash or property in excess of the filing threshold during 2016,
please do not hesitate to contact our office should you need assistance with
the preparation or review of a gift tax return.