Form 709 Gift Tax Return - Include Spouses Gifting Question

[M-MTax]

@Romper The other thing you might want to note is gift splitting is not beneficial sometimes depending......you're using the other spouse's DSUE and that may not be best when things like age and health and other stuff is considered.

[Romper]

Please explain how the math is wrong? Not doing DSUE, pretty simple gifting to kids and grand kids.

[M-MTax]

The instructions are hosed. Here's how I'd do for a hypo gift of $30k by one spouse to a kid. Result = entire annual exclusion used and the same is repeated for the other spouse....mailing both returns in the same envelope.

Gift of $30k:

FMV of gift by H = $30k x 1/2 = $15k

FMV of gift by W = $30k x 1/2 = $15k

Part 4 Line 1 = $15k

Part 4 Line 2 = $15k

Part Line 3 = $0

[M-MTax]

BTW read up on the lifetime exclusion because you can hose yourself if you don't know what you're doing. Talk to an estate planner.

[Romper]

I agree with your example for $30,000. That is the way it should work.

I redid my return using your suggestion (reporting only the individual spouse's gifts on each return) and it eliminates the spouse’s gifts on Line 1 as expected.

Unfortunately using my Form 709 software for 2020 with the spouse's split gifts in each return the results come right back to the original subject. The spouse's gifts are added to Line 1.

If the 2020 software did not add the spouse's gifts to line 1 the totals for Line 3 are identical for individual gifting and spouse gifting. I.e. the sum of both returns.

Therefore the problem remains - why are software providers for Form 709 including the spouse's gifting on Line 1 rather than following the instructions? 

Thanks for your help.

PS - I am familiar with the lifetime exemption. The concern is it is going to be lowered.

[james416]

First - I would like to thank you for highlighting this issue, even when other respondents have missed the point of the question.

This issue still exists so I'm going to layout how I came to the same question directly from Form 709.

working through the 2022 Form 709 -- Part 4, line 1 reads (CAPS added):

Total value of gifts of donor. Add TOTALS FROM COLUMN H  of parts 1, 2, and 3.

"TOTALS FROM COLUMN H" is the source of the issue, because Column H includes BOTH the gifts of the donor AND THE DONOR'S SPOUSE.

To rephrase:  Even though donors are "splitting", Schedule A Part 1 specifically has you add "Gifts made by the spouse".  So even though you are splitting, adding up Column H will give you the total gifts of BOTH spouses.

I would infer that software providers are also making this mistake?

The problem is then that on part 4 line 2 it asks for "total annual exclusions" for gifts listed on line 1.  So I would assume "total" means both spouses (in 2023 - $17,000*2=$34,000.

What's the purpose of having each spouse file 709 if the form is working on a TOTAL for both spouses?  Seems like the IRS would end up double counting the gifts.  

Or on an individual form -- do you double the annual exclusion as well as doubling the lifetime exclusion?

I am not concerned with going over $12.92mm * 2, but I am concerned with getting the correct numbers in.

Has anyone else resolved this -- and does the IRS form 709 part 4, line 1 perhaps incorrectly ask for the totals of Column H, rather than just 1 spouse's amount from Column H?

[james416]

Did you ever get a full answer to your question?  This problem still seems to exist with Form 709 in the 2022 and 2023 versions.

[M-MTax]

https://www.youtube.com/watch?v=tdFPQq4XM4Q

[Romper]

Thanks for your reply James416.

I've resorted to accepting the addition of the spouses gifts for two reasons:

1. Form 709, Part 4, Line 1 states Add Totals from column H of Parts 1, 2 and 3.
2. A reply from a enrolled agent at one of the Big tax preparation services - Line 1 technically does not include the spouse's gifts, but your half of the spouse's gifts, since you are splitting. 

One reason for each spouse filing a Form 709 is because of the required prior gifting history. It's very likely that each spouse has gifted differently.

Reference to your question on Total Annual Exclusion. It's not necessarily going to be 2x the annual exclusion. You may want to watch the video from MMtaxMM

https://www.youtube.com/watch?v=tdFPQq4XM4Q