Question

I need to prepare the Form 709 Gift Tax Return. Book- Prentice Halls Federal Taxation 2018 Comprehensive (30th edition) Chapter 12C Problem 59

Ned Norris, a widower, engaged in the transactions described below during 2017. He made only one earlier taxable gift, $1.2 million in 2014. Use this information to prepare a 2017 gift tax return (Form 709) for Mr. Norris, who resides at 11616 Starstruck Blvd., Southern City, CA 90068. Pages 4 and 5 of the form are not applicable to him • Transfer of title to unimproved land to son Nathan, age 31, fair market value of $2 million and adjusted basis of $300,000. • Payment of tuition ($35,000) to Private College and payment of off-campus apartment rent ($18,000) to Tall Tower, LLC for the benefit of daughter Natalie, age 21. • Transfer of title to vacation beach house to County Hospital, fair market value of $525,000 and adjusted basis of $320,000. • Payment of $17,000 life insurance premium on an insurance policy on his own life. He made a gift of the insurance policy to Nathan four years ago.

Answer 1

Computation of Income Chargeable to gift tax.
1) Transfer of title to unimproved land to son Nathan ( Subjected to gift tax - Note 1) (2000000-300000)	1700000
2) Payment of tuition ($35,000) to Private College for daughter Natalie ( Non taxable- Note 2)	0
3) payment of off-campus apartment rent to Tall Tower, LLC for the benefit of daughter Natalie ( Taxable- Note3)	18000
4)Transfer of title to vacation beach house to County Hospital ( Non Taxable - Note 4)	0
5) Payment of life insurance premium on an insurance policy on his own ( Taxable Note 5)	17000
Gross taxable gift	1735000
Less: Yearly exemption	14000
Net Taxable gift	1721000
Gift already done in past in 2014	1200000
Total taxable gift to be deduted from lifetime exemption (1721000+1200000)	2921000

Note 1. This is taxable as per the gift tax laws.

Note 2: Tuition or medical expenses one pays directly to a medical or educational institution for someone. Donor must pay the expense directly. If donor writes a check to donee and donee then pays the expense, the gift may be subject to tax. Hence in the given case this is taxable.

Note 3: This is taxable as only tution or medical expenses are only non taxable . rest all are taxable

Note 4:Gifts to charitable institutions are non taxable.

Note 5: Funds paid directly to medical service or health insurance providers on behalf of someone else is non taxable. s here the life insurance is paid and not medical insurance hence all amount is taxable.

Note 5: Gift tax law provides an deduction of$14000 to each individual.

Note 6: A lifetime exemption of $11.2 M is given to each individual.