Question on gift tax return

[texas_scot]

I live in a community property state, so per the IRS instructions for form 709, "If a gift is of community property, it is considered made one-half by each spouse. For example, a gift of $100,000 of community property is considered a gift of $50,000 made by each spouse, and each spouse must file a gift tax return".  

However what if the gift(s) of community property to a single recipient totaled $30,000.  In that case, would it be considered a gift of $15,000 made by each spouse and neither of us would need to file a gift tax return since it is below the $17,000 annual exclusion amount.  Does my interpretation sound correct?

[MinhT1]

Yes, you are correct.

A gift of community property of $30,000 to a single donee is considered a gift of $15,000 from each spouse and does not have to be reported as it is below the annual gift exclusion of $17,000 for 2023.

Please read this IRS document.

[M-MTax · Accepted solution]

Read the part about split gifts. Common misconception about filing 709s and be aware that what we're talking about is a gift from one person to one recipient......you can give up to the exclusion amount to any number of persons without having to file a return.

file:///C:/1/10-19-21%20W420T%20-%20FINAL.pdf

If you're splitting gifts and the total gift is of community property one spouse still needs to file a 709 and get the other's consent on the form unless the gift is below ONE spouse's exclusion.....that would be $18,000 for 2024. That is only one spouse needs to file if the total amount is below the exclusion amount like $30k in your example. Avoid filing by having each party make a gift up to the exclusion amount. If only one spouse makes the gift and it's say $30k then that party needs to file a 709 and get the other's consent on the form but only one 709 needs to be filed.

Does my interpretation sound correct?

No and here's a better example. 

You and you alone make a gift to a family member of $36,000 this year when the annual exclusion is $18,000 per person. You make this gift from an account you hold with your spouse as community property. You need to file a 709 and get your spouse's consent to split half of the $36,000 (HER HALF). It doesn't matter that both of you could have given $18,000 each without filing a 709 because YOU are the one who gave the $36,000. 

Here's one more tidbit of info......IF you gave the family member $100,000 instead of $36,000 then you AND your spouse would have to file separate 709s. 

[M-MTax · Accepted solution]

When the Consenting Spouse Must Also File a Gift Tax Return

In general, if you and your spouse elect gift splitting, then both spouses must file their own individual gift tax return.

However, only one spouse must file a return if the requirements of either of the exceptions below are met. In these exceptions, gifts means transfers (or parts of transfers) that do not qualify for the political organization, educational, or medical exclusions.

Exception 1.

During the calendar year:

• Only one spouse made any gifts,

• The total value of these gifts to each third-party donee does not exceed $34,000, and

• All of the gifts were of present interests.

[M-MTax · Accepted solution]

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@MinhT1 wrote:

A gift of community property of $30,000 to a single donee is considered a gift of $15,000 from each spouse and does not have to be reported as it is below the annual gift exclusion of $17,000 for 2023.

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Sorry but that's the wrong answer..... a gift tax return DOES need to be filed in that example. But only the spouse who makes the gift needs to file ONE 709 with the other spouse signing off on the split. If the gift is over the total that both can give then each need to file their own return.

FOR 2023: Married couple in community property state. One spouse gives a kid $34,000. That spouse needs to file a 709 with the other spouse's consent to split the $34,000. They file ONE 709. 

IF the one spouse gave the kid $100,000, then they could still split BUT EACH spouse would have to file a 709.

[DocSKH · Accepted solution]

in the case of giving $100,000, each donor has to file 709. Understood. But form 709 is confusing.

Is it splitting? 

I guess not. 

This is how I will file the form.

No need to check yes on box 12.

Each donor files $50,000 of transfer, takes exclusion of ($17000), and 'uses up' $33,000 of his/her lifetime exemption.

I don't think how that $100,000 were transferred. It could be lump sum, divided,  from one or many different accounts as long as the total for the year were $100,000.

Am I oversimplying?

[M-MTax · Accepted solution]

OK, it's technically splitting if one spouse made the gift from community property funds. Not sure it makes a great deal of difference in the end though because the result is the same.