Hi TexasTea,
I have not filed yet. I am still struggling with interpretations. After reviewing the i709 again, then comparing it to other information sources online; here's what I deduced so far:
- You can only split gift if the gift came from your individual account. That is, an account that's in your own name solely (without your spouse's name on it). The account only holds money you had before you got married, or maybe the money was an inheritance from your folks given only to you, or you and your spouse had a prenup specifying that the money belongs only to you.
If the source of your gift is NOT from such an account, then forget about gift splitting.
- Married couples in community property states (Arizona, California, Idaho, Louisiana, New Mexico, Nevada, Texas, and Washington), and in Wisconsin where Marital Property Laws have been adopted, are not required to split gifts because a gift by either spouse is deemed to have been divided by each spouse.
So a Gift from one of the community property states is automatically considered a gift of community property which is treated as one-half made by each spouse. I gather that means you have to file two separate returns (one for each spouse, with each return gifting 1/2 of the total amount received by your child).
I think that means $25k in your case, and only $14k in my case. Therefore, you have to file because 1/2 of your total gift ($25k) is over the $15k annual exclusion limit. And no gift tax return is required of me; because 1/2 of our total gift ($14k) is under the annual exclusion.
That is, until someone threw a monkey wrench into the pile by stating that "even though the gift is from a community property account, it is treated as individual property if only one spouse signed the check (even if both spouse's names are printed on the check)". The recommendation was for each spouse to write a separate check for 1/2 of the total gift, instead.
That recommendation makes sense. So for safety sake, my husband and I will do that next year. We will each write a check for $15k to stay under the $30k annual exclusion to avoid filing gift tax return. At the same time, the two bank checks will leave a paper trail for the gifts in case IRS comes asking for it.
Meanwhile, $28k has already been gifted away in a single transaction to our child this year, and I am back to square one bouncing between "to file" or "not to file".
At this point, I am inclined to do the following to play it safe:
Stop fiddling with split-gift. Instead, submit two separate returns: one for husband and one for myself, along with an explanation page and proof documents.
On each return, decline from GIFT-SPLITTING by answering "NO" on page 1, Part 1 - General Information, line 12; and leave line 13-18 blank.
On Schedule A, Part I:
column B -- after donee name, address, and description of gift, etc.; write "SEE DETAILS IN CONTINUATION PAGES ATTACHED".
column C -- blank
column D -- 1/2 of the cost basis to purchase the 28K stocks
column E -- Signature Date for the single transfer of stocks
column F -- 14k (value of the stocks at date of gift)
column G -- blank (not gift splitting)
column H -- 14k (Net Transfer)
CONTINUATION PAGE -- 1 of 5 (Overview:(
Gift was made from a joint account in a community property state via a single transaction with only one spouse's signature. Assuming this gift is considered made 1/2 by each spouse, we would not be required to file because the amount will be under the $15k annual exclusion for each spouse.
However, because the transaction document only shows the full amount of $28k transferred, signed by only one spouse, we are filing two separate returns to make sure that only 1/2 of that $28k is accounted for in each spouse's lifetime exclusion records for documentation purpose. I hope this will have the same effect as gift splitting, even though the gift is from community property .
Please advice if this line of thought is incorrect, and let me know if any further information is required.
CONTINUATION PAGE -- 2 of 5 (1st of 4-page proof document showing details of the single transfer of $28k stocks to child, signed by one parent only) -- Note on the document to indicate that the 28k is a gift of community property: 14k was gifted by husband, and 14k was gifted by wife, total gift received by child is 28K.
CONTINUATION PAGE -- 3, 4, and 5 of 5 (rest of proof document).
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I will mail each return in a separate envelop per the advice of tagteam (Level 15), in order to get proof of mailing and delivery.
Hopefully, this will provide enough paper trail to set the clock ticking officially for the 3-year statue of limitation for IRS review; as well as make it clear for future gift returns when it's time to tally up lifetime exemptions.
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Any suggestion to correct or improve this will be appreciated.
And thanks to everyone here who have contributed to help clarify this issue.
