Question

The Daltons live in Missouri, a separate property state. Here are the gifts they made during 2019 and compare the taxable gift amounts with and without the election of gift splitting.

	Mr. Dalton	Mrs. Dalton
Donee 1	$25,000	$5,000
Donee 2	$50,000	$0
Donee 3	$16,000	$9,000

With gift splitting, what is the total taxable gift for the household?

A. $20,000

B. $46,000

C. $90,000

D. $45,000

Answer 1

Gift splitting allows married couples to double the exclusions by making joint gifts to third parties for gift tax purposes.

With gift splitting, Daltons distributed their gifts to donees jointly as follows:

Total gifts to Donee 1 = $25,000 + $5,000 = $30,000

Total gifts to Donee 2 = $50,000 + $0 = $50,000

Total gifts to Donee 3 = $16,000 + $9,000 = $25,000

Gift exclusion limit for Daltons with gift splitting = $15,000 + $15,000 = $30,000

Daltons paid gifts to Donee 1 and Donee 3 under the limit. For, Donee 2, they paid $20,000 ($50,000 - $30,000) as taxable gift.

With gift splitting, total taxable gift for the household = $20,000

Answer is A. $20,000