Wednesday, March 28, 2018

Gift Tax Return - Reminder


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 2017, the below summary may be critical to your tax planning.  

The due date for a 2017 gift tax return is April 17, 2018, the same due date as your 2017 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 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 2017, please do not hesitate to contact our office should you need assistance with the preparation or review of a gift tax return.