Question

Christian wants to transfer as much as possible to his four adult married children (including spouses) and eight minor grandchildren without using any unified transfer tax credit. 

a. How much can Christian give, so as to accomplish his tax goal? 

b. What if Christian’s wife, Mia, joins in the gifts? 

c. Express your computations for parts (a) and (b) as Microsoft Excel commands.

 

 

Answer 1

Gift taxes:

Property transfers without adequate consideration are generally subject to gift taxes. Amount of gift is fair market value of asset given reduced by the amount of consideration received, if any. Incomplete transfers are not subject to gift taxes. A transfer which retains right to reclaim by the donor of the property given is an incomplete transfer. Amounts paid for tuition fees and medical expenses for others are not subject to gift taxes.

 

(a)

Annual gift tax exclusion is $15,000 per donee. Exclusion is available for each donee but not limited to the donor. Each adult children, their spouses, and minor children can receive $15,000 each. Then maximum gift for the year is:

Particular	Amount
Number of children	4
Spouses of children	4
Number of grandchildren	8
Total number of donees	16
X exclusion per done	$15,000
Total non-taxable gifts	$240,000

Thus, taxpayer can give a gift of $240,000.

 

(b)

Even gift-splitting is elected then couple together can give $30,000 to each donee. Then exclusion per donee is $30,000. Amount of non-taxable gift for the year then is:

Particular	Amount
Number of children	4
Spouses of children	4
Number of grandchildren	8
Total number of donees	16
X exclusion per done	$30,000
Total non-taxable gifts	$ 480,000

Thus, taxpayer can give a gift of $480,000.

 

(c)

Required inputs are total number of donees and option of gift splitting election. Below worksheet captures the inputs required and the output:

 

Particular	Amount	Formula
Number of children	4
Spouses of children	4
Number of grandchildren	8
Total number of donees	16
Gift-splitting	No
X exclusion per done	$15,000	=IF(C8=”Yes”,30000,15000)
Total non-taxable gifts	$240,000	=C7*C9

Answer in part (a) can be computed using the above formula in the worksheet.

Answer in part (b) can be calculated using the same worksheet modifying gift-splitting election to Yes as shown below:

 

Particular	Amount	Formula
Number of children	4
Spouses of children	4
Number of grandchildren	8
Total number of donees	16
Gift-splitting	Yes
X exclusion per done	30,000	=IF(C8=”Yes”,30000,15000)
Total non-taxable gifts	$240,000	=C7*C9

With the same formula amount of non-taxable gift is calculated as shown in the worksheet.

Gift taxes:

Property transfers without adequate consideration are generally subject to gift taxes. Amount of gift is fair market value of asset given reduced by the amount of consideration received, if any. Incomplete transfers are not subject to gift taxes.