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RocketJSquirrel
Level 6

Form 709: Gift splitting confuses me

The wife and I gave a large enough gift in 2019 to require Form 709. We are in CA, a community property state.

 

Form 709 instructions say we must each file a form for half the total gift because it was community property. That part I understand.

 

What I don't understand is the term "gift splitting" and the split gift part of 709. I am guessing that "gift splitting" does not apply and I should leave it blank because we're each filing for half the total gift. Right?

35 Replies
Bsch4477
Level 15

Form 709: Gift splitting confuses me

Complete lines 12-18 if the gift was from community property.

RocketJSquirrel
Level 6

Form 709: Gift splitting confuses me

I wasn't asking which lines to complete. There are lines 12-18 in Part 1 and Part 2. I understand both of those Parts. I believe you meant Part 1.

 

The question is about Form 709 Schedule A Part 1, "Gifts Subject Only to Gift Tax", which has no line numbers.

 

The instructions are weird. Page 1, "Who must file" says community property requires 2 separate forms.

 

Page 6, "Split Gifts" also says 2 separate forms are required when gift splitting with a few inapplicable (to us) exceptions. Schedule A of the form talks about dividing the gift in half. But we already divided the gift in half, half on each of 2 709s.

 

It's as if the IRS is being purposely confusing. First time that ever happened!

Bsch4477
Level 15

Form 709: Gift splitting confuses me

Let’s take an example of a gift of $100,000 from community property.  Sch A has you divide the gift in half. That $50,000 flows to Part 4 line 1.  The annual exclusion ($15,000) is subtracted leaving $35,000 on line 3 and line 11.  That amount goes to page 1, part 2, line 1 where the tax is calculated and later in the form the $11.4 million gift exclusion will zero the tax out.  As you have said, the same information on your spouse’s form is also filed so the total amount of the gift is accounted for. 

RocketJSquirrel
Level 6

Form 709: Gift splitting confuses me

I understand all that. My question is simply whether "gift splitting" is something I need to do. I'm going to assume it's not because the gift is already split. It's just the form instructions which confuse me. So I decided to phone the IRS.

 

After 46 minutes on hold, I spoke to a rep via their special Gift & Estate Tax phone number only available 8:00am - 3:30pm EASTERN time (I'm in CA).

 

These friendly phone reps do not provide help completing Form 709. The Tax Assistance group no longer exists, she told me. I assume budget cuts got them the axe. The current "special" group can only help with the mechanics, as in you sent a form to the wrong address or want to inquire about a form's status. SMH.

Bsch4477
Level 15

Form 709: Gift splitting confuses me

You are correct.  You have already split the gift by each of you filing a form for half of the gift.

Definition of a Split Gift:  A split gift refers to a gift that is made by a spouse to a third person. The gift is given to a third person for gift tax purposes. It is also known as gift splitting or gift splitting election. ... Under split gift, a married couple can treat gifts made by one spouse as if they were made one-half by each spouse.

TinyTVT
Returning Member

Form 709: Gift splitting confuses me

I’m confused and am not able to get online or phone help from irs.......so the $11.4 million exclusion goes where? Part 2, line 7? And is that in every case? So basically if giving $100,000 gift, there will be no balance due as long as the donor has not exceed the lifetime giving amount of 11.4 million? And if splitting the gift between spouses, each $50,000 gift would be treated the same? 

Bsch4477
Level 15

Form 709: Gift splitting confuses me

Yes, it goes on line 7 of part 2. Yes, each spouse completes a separate 709 and each half of the gift is treated the same on each form. If you don’t have it, the instructions for the form are here:

https://www.irs.gov/pub/irs-pdf/i709.pdf

 

 

 

 

 

chubbycheeky
Returning Member

Form 709: Gift splitting confuses me

Hi,

Thank you for clarifying about gift splitting. My situation is slightly different. Please tell me if I am correct given the following situation:
My husband & I own a joint brokerage account held inside a California Living Trust. As grantor of the trust, I alone signed off to transfer shares of mutual fund worth $28,000 from this joint account to my daughter's individual brokerage account. Because the mutual fund is community property, I gather that my husband & I each need to file a separate gift tax return for half of the $28,000 to split gift. Please tell me if I am thinking correctly for Schedule A, Line 1:

Column D (Donor's adjusted basis of gift):  $18,000
Column E (Date of gift): The date the transfer was signed by me in 2020.
Column F (Value at date of gift):  $18,000
Column G (For split gifts, enter 1/2 of Column F):  $9,000
Column H 
(Net Transfer … subtract col. G from col. F):  $9,000

All three of us are U.S. Citizens; my daughter lives in California, and my husband and I now reside in Canada. I understand that we are supposed to mail both of the gift tax returns together in the same envelop.

I am wondering if the donor's adjusted cost basis in Column D is referring to the original cost when I purchased the shares many years ago, or is $18,000 correct the way it is as shown above.

Also, the form 709 is for 2019. Do I have to download a new one that is for 2020?   And what proof documents do I need to include with the gift tax returns.

Please advise.  Thanks very much in advance.  kk

 

tagteam
Level 15

Form 709: Gift splitting confuses me


@chubbycheeky wrote:

I am wondering if the donor's adjusted cost basis in Column D is referring to the original cost when I purchased the shares many years ago, or is $18,000 correct the way it is as shown above.

Also, the form 709 is for 2019. Do I have to download a new one that is for 2020?   And what proof documents do I need to include with the gift tax returns.


The donor's adjusted basis would be your original cost (plus any additional costs or improvements), not the fair market value at the time of the gift.

 

For gifts made during the 2020 calendar year, you will want to use the 2020 version of Form 709.

 

For assets other than cash, it is best to include a qualified appraisal or a detailed description of the method used to determine the fair market value of the gift.

Bsch4477
Level 15

Form 709: Gift splitting confuses me

You do not have to file form 709.  Each person can give a gift of $15,000 to an individual without consideration of gift tax. So you and your husband can give your daughter $30,000.  Your $28,000 gift is below that level. 

tagteam
Level 15

Form 709: Gift splitting confuses me

If the donor spouse made gifts of more than $15,000 but not more than $30,000, they can file just one Form 709 and check the consent box. 

 

See https://www.irs.gov/instructions/i709#idm140554801355200

TexasTea
Level 1

Form 709: Gift splitting confuses me

RocketJSquirrel:  hope you are still watching this thread a year later...  I'm facing the same issue and wondering how you ended up filing your return?  I'm in community property state TX and I'm tending to interpret the rules as I think you have, i.e. that the split in the gift occurs automatically because of community property rules, so I don't think I need to elect gift splitting in question #12 on the form, or show the split on Schedule A in column G.

 

So for example if I made a gift to my child of $50,000 in a single transaction, I think the correct reporting is for each of my spouse and me to file a gift tax return where we would each show a $25,000 gift in schedule A.  We would not select gift splitting, and we would not show the $50,000 total anywhere on the form.   Is that the way you ended up doing it, and was it accepted without question by IRS?    I'm a bit concerned that the end result is a form that doesn't have a very good audit trail, given that the $25,000 figures won't match the $50,000 transfer amount.  So am looking for some feedback to confirm that is the expected result in a community property state.  

 

Thanks 

tagteam
Level 15

Form 709: Gift splitting confuses me

Gift splitting comes into play (typically) when the gifted property is held individually (i.e., as separate property); the spouse who owns the property (separately) can elect to split the gift so one-half is treated as given by her and one-half is treated as given by her spouse.

 

With respect to gifts made where the property is held as community property (or certain property considered to be jointly held), the gift is considered to be made one-half by each spouse.

 

 

TexasTea
Level 1

Form 709: Gift splitting confuses me

Thanks TagTeam:  so as a follow-up, do you think people in my situation should mail both spouses' gift returns in the same envelope?  Line #17, which asks whether a return will be filed by spouse, and says to submit both in the same envelope, only needs to be answered if gift splitting was selected in #12.   So the implication is that if gift splitting is not selected, the returns should be submitted separately.  But I'm leaning towards putting them in the same envelope anyway to help the IRS connect the dots should they try to match the gifts to actual transfers.   

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