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johnsantaclara1
Level 4

Form 709 - What is the consequnece if only one spouse submitted 709 in community property state?

 The 709 form instructions say that both spouses have to file gift tax return for half the gifted amount each, in community property state.

 

But what is the consequence if only 1 spouse submitted the 709 gift tax return for the full amount she gifted to their common son from her earnings? (Just FYI that they keep their accounts separate, file taxes as married filing separately, and the son is claimed as dependent only on the tax return of the gifting spouse. Also the amount gifted and their total estate is less than the lifetime exemption of $11 million.)


a) Will there be any penalties just becuase the other spouse did not submit 709 for half the gifted amount? (though there is no gift tax owed)? If so, who will be penalized - the son (receiver) or the parent/s? How much can the penalties be?
b) Or will there be no penalties and only 1 person's lifetime exemption will be considered?

1 Best answer

Accepted Solutions
tagteam
Level 15

Form 709 - What is the consequnece if only one spouse submitted 709 in community property state?

If the gift is considered to be one-half from each spouse and only one spouse files a return, then that would be an issue the non-filing spouse would have to address (if that ever arises).

 

Note that the penalty for not filing a gift tax return is typically based on gift tax due. In most instances no gift tax is due and, thus, there is no amount on which to base a penalty. The only possibility left would be a flat charge for not filing a return (typically in the neighborhood of $435).

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4 Replies
tagteam
Level 15

Form 709 - What is the consequnece if only one spouse submitted 709 in community property state?

For the gift to be considered made one-half by each spouse in a community property state, the gift must be of community property (i.e., gifts of separate property are exactly that).

 

See https://www.irs.gov/instructions/i709#idm140535812766672

johnsantaclara1
Level 4

Form 709 - What is the consequnece if only one spouse submitted 709 in community property state?

Thank you so much for your response! My question was: What is the consequence if splitting is not desired and only 1 spouse submitted 709 for the full amount she gifted from her earnings to their son, and the other spouse did not submit 709 for half that amount.  

 

(Though it is from her earnings and separate account and they file taxes as married filing separately, I guess it may still be considered community property as they are still legally married)

tagteam
Level 15

Form 709 - What is the consequnece if only one spouse submitted 709 in community property state?

If the gift is considered to be one-half from each spouse and only one spouse files a return, then that would be an issue the non-filing spouse would have to address (if that ever arises).

 

Note that the penalty for not filing a gift tax return is typically based on gift tax due. In most instances no gift tax is due and, thus, there is no amount on which to base a penalty. The only possibility left would be a flat charge for not filing a return (typically in the neighborhood of $435).

johnsantaclara1
Level 4

Form 709 - What is the consequnece if only one spouse submitted 709 in community property state?

Thank you very much Champ! That's super useful info. Really appreciate your advice.

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