Question

Bob makes the following gifts in 2017:

In 2010 he gifts $190,000.00 to his daughter Maya to buy a home;

In 2011 he gifts $50,000.00 to Maya by paying UPMC Hamot for a surgery Maya

had to have her appendix removed; and

In 2015 he gave her $250,000.00 as a part of his estate planning

1. Does Bob have to file a gift tax return?

2. What is his gift tax liability for each year?

Answer 1

A gift tax is a tax applied to an individual giving anything of value to another person as per Federal Tax laws. Any individual who gifts more than the specified gift amount limit for the given financial year or gifts amount more than the limit of a life time aggregate has to file the IRS 709 form for gift tax return. This is subject to the aggregate limit of gift tax over a life time $5.49 Million as of 2017, the same has been increased to $11.4 Million as of 2019.

1. Since Bob is making gifts in 2017,the gift tax returns filing is subjected to the aggregate limit of Gift tax $5.49 Million over a life time. Hence Bob may not have to pay the gift tax immediately if the aggregate limit of $5.49 Million is not met. Bob may not have to pay the gift tax for all the years. If Bob crosses the limit of $5.49 Million he has to pay the gift tax and file gift tax return for all the mentioned years as applicable

2. Tax liability for each year if Bob crosses the life time gift tax exclusion amount

2010

Annual Gift Tax Exclusion $13000 Maximum Tax rate 35%

Gift by Bob to Maya- $190000

Taxable amount=$190000-$13000

Total Taxable amount for 2010=$177000

Gift Tax=35%

Gift tax to be paid by Bob for 2010=35% * $177000=$61950

2011

Annual Gift Tax Exclusion $13000 Maximum Tax rate 35%

Gift by Bob to Maya- $50000

Taxable amount=$50000-$13000

Total Taxable amount for 2011=$37000

Gift Tax=35%

Gift tax to be paid by Bob for 2011=35% * $37000=$12950

2015

Annual Gift Tax Exclusion $14000 Maximum Tax rate 40%

Gift by Bob to Maya- $250000

Taxable amount=$250000-$14000

Total Taxable amount for 2015=$236000

Gift Tax=40%

Gift tax to be paid by Bob for 2015=40% * $236000=$94400