Do I need to file form 709 if the gift amount is less than $14000?

[VAer]

I gave a relative some money (less than $14000) a few days ago. Based on Form 709 instruction ("If you meet all of the following requirements, you are not required to file Form 709. You made no gifts during the year to your spouse. You did not give more than $14,000 to any one donee. All the gifts you made were of present interests"), it seems that I don't need to file the form 709, since the gift is cash and was given to a relative. The gift meets all the three requirements.

But at the other hand, the current lifetime gift upper limit is 5.45 millions. If I do not file form 709, how can that amount of money gift be deducted from 5.45 millions?

Thanks.

[jerry2000 · Accepted solution]

If you give less than $14,000 to any individual in a year, you do not have to file a 709. And the answer to your second question is simply that anything under $14,000 does not get subtracted from your lifetime exclusion.

[VAer]

Why not subtract from lifetime exclusion? It does not make sense, for example, if I give $6000 to each of 1000 persons in 2016, the total given away amount is 6 millions. It still meets all the three requirements, and I don't need to file form 709. And I still have 5.45 million exclusion left???

[jerry2000]

That is the tax code. There is no requirement for it to make sense. You can read the instructions for Form 709 yourself at
<a rel="nofollow" target="_blank" href="http://apps.irs.gov/app/picklist/list/formsPublications.html;jsessionid=j6pAih2A4S7pnn+FIt3f7A__?val...>

[VolvoGirl]

Yes.  You can send me some of that money!

[VAer]

Thanks. I have read the instruction before asking the question, I copied some instruction in my question. I just feel like it does not make sense.

[TaxGuyBill]

The Lifetime limit for "taxable" gifts is $5.45 million.  The first $14,000 per person, per year, is not "taxable".
<a rel="nofollow" target="_blank" href="https://www.irs.gov/instructions/i709/ch01.html#d0e453">https://www.irs.gov/instructions/i709/ch01.h...>

[VAer]

I know it is not taxable, but the original post is "should I report it"? Based on instruction, I do not need to report it; but if I don't report it, how can IRS deduct 14,000 from $5.45 millions? It just does not make sense.

[TaxGuyBill]

For purposes of Gift Tax, a "taxable" gift means a gift in excess of $14,000 that reduces the $5.45 million.  It is still called a "taxable gift", even if you are not actually paying Gift Tax.  If all gifts are under $14,000, it does NOT reduce the $5.45 million.

[VolvoGirl]

Nothing in taxes or with the govt  makes sense.  You don't have to report it and they will never know or need to deduct it from your lifetime amount.  End of story.