Question

Using property she inherited, Myrna makes a 2017 gift of $6,200,000 to her adult daughter, Doris. Neither Myrna nor her husband, Greg, have made any prior taxable gifts.

Click here to access the tax tables to use for this problem.

If an amount is zero, enter "0".

a. If the election to split gifts is not made, the taxable gift is $____ and gift tax due on the gift is $____.

b. If the election is made, then the taxable gift from Myrna is $____ and from Greg is $____. Gift tax due from Myrna is $____ and from Greg is $____.

c. The tax savings from making the election is $_____.

Answer 1

There are two types of exemption from gift tax:

• Firstly, annual exemption of $15,000 for each tax payer. By splitting the gift, married couples can double the amount of exemption.
• Secondly, a lifetime basic exclusion of 11.58 million is allowed for the gifts made during the life time.

In the given case,

a. If the election to split the gift is not made, the taxable gift is $6,185,000 ($6,200,000 - $15,000) and the tax due on gift is $0 (as no previous gifts have been made and the amount of gift is within the limit of $11.58 million)

b. If the election to split the gift is made, the taxable gift is $6,170,000 ($6,200,000 - $15,000 - $15,000) and the tax due on gift is $0 (as no previous gifts have been made and the amount of gift is within the limit of $11.58 million)

c. The tax saving from making the election is $0 (as no tax is payable in both cases)

Feel free to ask for any clarification, if required. Kindly provide feedback by thumbs up. It would be highly appreciated. Thank You.