A question about filling out the IRS form 709.

A question about filling out the IRS form 709. In the IRS instructions, on page three, under the heading of Annual Exclusions, it states that the first $13,000 may be subtracted from the fair market value of the gift. Is this correct & if it has been two years that the donee has been gifted an interest in this property, may I reduce the fair market value by $13,000 for each of these two years ?
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    As to the first question, the answer is YES.  Only gifts over $13,000 count towards your lifetime exclusion.

    As to the second question, the answer is NO.  Each year you are allowed an annual exclusion for gifts give before any reporting is required.  You can't "store up" gifts given over the course of years and then apply the sum of these annual exclusions in the year you need to fill out Form 709.

    However, a married couple can each give $13,000 to an individual in one year, for a total of $26,000.

    Tom Young
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      A continuing question - we are married & can my wife also give the second $13,000 if the property in question  is in a Trust for me & she has her own Trust as well ? Thanks ! 
      • I'm not sure I can answer this but for anyone to give a definitive answer I think more details are required.

        What sort of trusts are these?  Revocable ("living") trusts or something else?  When the property was passed out of the trust to you how was the property held?  Jointly, or solely by you?

        My instinct is that if the property was held jointly before being passed on to the gift recipient (e.g., cash taken out of the trust, deposited in a joint account, and then a check written from there) then the combined exclusion would apply.  But these issues are tricky and I'm certainly no expert.

        Tom Young
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      This is a Revocable Trust established in 2007 & this building lot was put in the Trust. It had been jointly owned by me & the wife for 20+ years before 2007. In 2010 I did a quit claim deed for this lot giving each of our three kids 25% & kept 25% for my Trust. Thanks !
      • Typically a husband and wife establish a living trust with both spouses as Trustors, Trustees and Beneficiaries of the trust and all the joint assets are placed into the trust.  For a piece of real estate the new title (recorded with the county office in charge of such things) will read along the lines of "Joe Doe and Jane Doe, Trustees for the 2 Does Family Trust".  In this situation the IRS treats the trust as a disregarded entity, completely ignoring it from a tax standpoint.  If this is your situation there's no doubt that the gift was made jointly by your wife and yourself to your 3 kids meaning, for 2012, you each could exclude $13,000 per child or a total of (2 x $13K x 3) = $78K.  

        Tom Young
      • Sounds like a plan !! Thanks Tom !!
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