Gift Tax Considerations

In 2014, generally, gifts valued up to $14,000 per person could be given to any number of people and none of the gifts will be taxable. If the gifter is married, both he and his spouse could have separately given gifts valued up to $14,000 to the same person without making a taxable gift. If one spouse gave a gift valued at more than the $14,000 exclusion then the following could apply.

Example 1.
A person gave his niece a cash gift of $8,000. It is his only gift to her in 2014. The gift is not a taxable gift because it is not more than the $14,000 annual exclusion.
Example 2.
A person paid the $15,000 college tuition of a friend directly to his college. Because the payment qualifies for the educational exclusion, the gift is not a taxable gift.
Example 3.
A person gave $25,000 to his 25 year-old daughter. The first $14,000 of the gift is not subject to the gift tax because of the annual exclusion. The remaining $11,000 is a taxable gift.

Gift splitting.
If a person or his spouse made a gift to a third party, the gift can be considered as made one-half by the person and one-half by his spouse. This is known as gift splitting. Both spouses must agree to split the gift. If there is consent to split the gift, both spouses can ask their CPA to apply the annual exclusion ($14,000) to one-half of the gift.

For gifts made in 2014, gift splitting allows married couples to give up to $28,000 to a person without making a taxable gift. If a gift is split, both spouses must file a gift tax return to show an agreement to use gift splitting. Form 709 must be filed even if half of the split gift is less than the annual exclusion.

Example.
Harold and his wife, Helen, agreed to split the gifts that they made during 2014. Harold gave his nephew, George, $21,000, and Helen gave her niece, Gina, $18,000. Although each gift is more than the annual exclusion ($14,000), by gift splitting they made these gifts without making a taxable gift. Harold’s gift to George is treated as one-half ($10,500) from Harold and one-half ($10,500) from Helen. Helen’s gift to Gina is also treated as one-half ($9,000) from Helen and one-half ($9,000) from Harold. In each case, because one-half of the split gift is not more than the annual exclusion, it is not a taxable gift. However, each of them must file a gift tax return.

From: PROTECTION GROUP, LLC