When A Gift Tax Form 709 Is Required-Do I Include All Gifts, Including Those Under $15,000?

[Romper]

My wife and I have gifted to daughter, son in law, grandson and his wife totaling more than enough to require a Gift Tax Return, Form 709 for 2021.

Several of the gifts were under the $15,000 exclusion.

Question:

When a Form 709 is required does the IRS want all gifts reported, even those under the $15,000 exclusion?

Not to bias the responses but one of the large tax prep companies has told me to include all the gifts.

Agree/Disagree

Please reference the basis for your comment.

Thanks

[Anonymous_]

See https://www.irs.gov/instructions/i709#en_US_2021_publink16784xd0e1445

On Schedule A, you would include gifts (that would be) subject to gift tax. Thus, gifts to any one individual that total more than $15,000 ($16,000 for 2022).

Note that one of your gifts may be subject to GST tax.

[Romper]

Thankyou Tagteam for your reply.

Your response is what I initially thought but given that the enrolled agent at the well known tax prep company said to include all gifts, including those under $15,000, caused me to look for supporting documentation. The results seem to support not including gifts under $15,000.

The instructions are poorly written but...

1.  I did find that the directions for the worksheet for Schedule B state: "Enter the amount of ALL Taxable gifts. 
2. The definition of "Taxable Gifts" is poorly defined but the subject seems to be addressed under Annual Exclusion: "All of the gifts made during the calendar year to a donee are fully excluded under the annual exclusion if they are all gifts of present interest and they total $15,000 or less". This seems to support not including gifts under $15,000.
3. U.S. Code § 2503 - Taxable gifts (This is quite old)

(a)General definition The term “taxable gifts” means the total amount of gifts made during the calendar year, less the deductions provided in subchapter C (section 2522 and following).

(b)Exclusions from gifts

(1)In general

In the case of gifts (other than gifts of future interests in property) made to any person by the donor during the calendar year, the first $10,000 of such gifts to such person shall not, for purposes of subsection (a), be included in the total amount of gifts made during such year.

 I am aware of the GST Exemption and the change to the annual exclusion to $16,000 for 2022.

[Anonymous_]

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@Romper wrote:

Your response is what I initially thought but given that the enrolled agent at the well known tax prep company said to include all gifts, including those under $15,000, caused me to look for supporting documentation.

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Understood and that is understandable as a general principle.

Unfortunately, although everyone makes mistakes on one occasion or another, there are quite a few people (including professionals) who maintain a position in spite of all evidence, documentation, statutes, regulations, et al, to the contrary.

There are also those who state a proposition without any support or authority whatsoever (and who cannot produce any when questioned further).

For example, with respect to gift tax returns, there was once a member of this board (years ago now) who maintained that once you filed a gift tax return (Form 709) you had to file one each and every year even if no gifts were made. A ridiculous statement with absolutely no supporting authority, yet it remained his position and was posted numerous times. I cannot help but wonder how many people out there still believe that erroneous bit of information.

[Romper]

Thanks again Tagteam...

The instructions for Form 709 are written so poorly that I question how many returns are really done correctly. 

I should probably initiate a new question for the following but I'll give it a try here given your expertise.

We are Arizona residents so our assets are Community Property (no separate property). As such, I divide the gifting for 2021 in half. Reporting equal halves of the gifting on my For 709 return and half on my wife's return.

The software I use is very elementary with very few instructions. 

Question:

After filling out the General Information on page 1 for each of our returns.

For my Form 709 - My software provider says to report my half of the Taxable Gifts on the donors section of Schedule A, Part 1 and my wife's half on the Gifts Made By Spouse section of Schedule A, Part 1.

I then am advised to select the Split option for all gifts.

I do the same for gifts to our grandson and his spouse under Schedule A, Part 2, Direct Skips.

For my wife's Form 709:

Repeat the above for her return. Since I divided the total Taxable Gifts in half, the entries will be identical.

Does this sound correct?

Thanks again

[Anonymous_]

Yes, and it is always prudent to follow your software provider's instructions (I suspect I know which one it is).

[Romper]

Thanks Tagteam...

The provider is in Ohio. Starts with a P. 

[Anonymous_]

"Pur-ely" excellent, @Romper. 😉

[Romper]

Yes. Pretty elementary but it works. Not for beginners unless you are experienced with the process. It's the only one I found that is affordable for a single user. 

Easy to talk to Ernie and videos are pretty well done.

Given the poorly written instructions for Form 709 you never quite know if you've done it correctly.

[Anonymous_]

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@Romper wrote:

Given the poorly written instructions for Form 709....

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I could not agree more; they are pretty awful.