If you are wondering: “Does Form 709 Need To Be Filed With 1040?” Then this article is for you!
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- The annual gift exclusion for 2022 is $16,000. See Annual Exclusion, later.
- For gifts made to spouses who are not U.S. citizens, the annual exclusion has increased to $164,000. See Nonresidents Not Citizens of the United States, later.
- The top rate for gifts and generation-
skipping transfers remains at 40%. See Table for Computing Gift Tax. - The basic credit amount for 2022 is $4,769,800. See Table of Basic Exclusion and Credit Amounts.
- The applicable exclusion amount consists of the basic exclusion amount ($12,060,000 in 2022) and, in the case of a surviving spouse, any unused exclusion amount of the last deceased spouse (who died after December 31, 2010). The executor of the predeceased spouse’s estate must have elected on a timely and complete Form 706 to allow the donor to use the predeceased spouse’s unused exclusion amount.
Purpose of Form
Use Form 709 to report the following.
- Transfers subject to the federal gift and certain generation-skipping transfer (GST) taxes and to figure the tax due, if any, on those transfers.
- Allocation of the lifetime GST exemption to property transferred during the transferor’s lifetime. (For more details, see Schedule D, Part 2—GST Exemption Reconciliation , later, and Regulations section 26.2632-1.)
All gift and GST taxes must be figured and filed on a calendar year basis. List all reportable gifts made during the calendar year on one Form 709. This means you must file a separate return for each calendar year a reportable gift is given (for example, a gift given in 2022 must be reported on a 2022 Form 709). Do not file more than one Form 709 for any 1 calendar year.
How To Complete Form 709
- Determine whether you are required to file Form 709.
- Determine what gifts you must report.
- Decide whether you and your spouse, if any, will elect to split gifts for the year.
- Complete lines 1 through 19 of Part 1—General Information.
- List each gift on Part 1, 2, or 3 of Schedule A, as appropriate.
- Complete Schedules B, C, and D, as applicable.
- If the gift was listed on Part 2 or 3 of Schedule A, complete the necessary portions of Schedule D.
- Complete Schedule A, Part 4.
- Complete Part 2—Tax Computation.
- Sign and date the return.
Make sure to complete page 1 and the applicable schedules in their entirety. Returns filed without entries in each field will not be processed.
Remember, if you are splitting gifts, your spouse must sign line 18 in Part 1—General Information.
Who Must File
In general. If you are a citizen or resident of the United States, you must file a gift tax return (whether or not any tax is ultimately due) in the following situations.
- If you gave gifts to someone in 2022 totaling more than $16,000 (other than to your spouse), you probably must file Form 709. But see Transfers Not Subject to the Gift Tax and Gifts to Your Spouse, later, for more information on specific gifts that are not taxable.
- Certain gifts, called future interests, are not subject to the $16,000 annual exclusion and you must file Form 709 even if the gift was under $16,000. See Annual Exclusion, later.
- Spouses may not file a joint gift tax return. Each individual is responsible to file a Form 709.
- You must file a gift tax return to split gifts with your spouse (regardless of their amount) as described in Part 1—General Information, later.
- If a gift is of community property, it is considered made one-half by each spouse. For example, a gift of $100,000 of community property is considered a gift of $50,000 made by each spouse, and each spouse must file a gift tax return.
- Likewise, each spouse must file a gift tax return if they have made a gift of property held by them as joint tenants or tenants by the entirety.
- Only individuals are required to file gift tax returns. If a trust, estate, partnership, or corporation makes a gift, the individual beneficiaries, partners, or stockholders are considered donors and may be liable for the gift and GST taxes.
- The donor is responsible for paying the gift tax. However, if the donor does not pay the tax, the person receiving the gift may have to pay the tax.
- If a donor dies before filing a return, the donor’s executor must file the return.
Does Form 709 Need To Be Filed With 1040?
If you meet all of the following requirements, you are not required to file Form 709.
- You made no gifts during the year to your spouse.
- You did not give more than $16,000 to any one donee.
- All the gifts you made were of present interests.
Gifts to charities.
If the only gifts you made during the year are deductible as gifts to charities, you do not need to file a return as long as you transferred your entire interest in the property to qualifying charities. If you transferred only a partial interest, or transferred part of your interest to someone other than a charity, you must still file a return and report all of your gifts to charities.
Note.
See Pub. 526, Charitable Contributions, for more information on identifying a qualified charity.
If you are required to file a return to report noncharitable gifts and you made gifts to charities, you must include all of your gifts to charities on the return.
Transfers Subject to the Gift Tax
Generally, the federal gift tax applies to any transfer by gift of real or personal property, whether tangible or intangible, that you made directly or indirectly, in trust, or by any other means.
The gift tax applies not only to the free transfer of any kind of property, but also to sales or exchanges, not made in the ordinary course of business, where value of the money (or property) received is less than the value of what is sold or exchanged. The gift tax is in addition to any other tax, such as federal income tax, paid or due on the transfer.
The exercise or release of a general power of appointment may be a gift by the individual possessing the power. General powers of appointment are those in which the holders of the power can appoint the property under the power to themselves, their creditors, their estates, or the creditors of their estates. To qualify as a power of appointment, it must be created by someone other than the holder of the power.
The gift tax may also apply to forgiving a debt, to making an interest-free or below-market interest rate loan, to transferring the benefits of an insurance policy, to certain property settlements in divorce cases, and to giving up some amount of annuity in exchange for the creation of a survivor annuity.
The gift tax applies to any digital asset. Digital assets are any digital representations of value that are recorded on a cryptographically secured distributed ledger or any similar technology. For example, digital assets include non-fungible tokens (NFTs) and virtual currencies, such as cryptocurrencies and stablecoins. If a particular asset has the characteristics of a digital asset, it will be treated as a digital asset for federal transfer tax purposes.
Bonds that are exempt from federal income taxes are not exempt from federal gift taxes.
Sections 2701 and 2702 provide rules for determining whether certain transfers to a family member of interests in corporations, partnerships, and trusts are gifts. The rules of section 2704 determine whether the lapse of any voting or liquidation right is a gift.
Gifts to your spouse.
You must file a gift tax return if you made any gift to your spouse of a terminable interest that does not meet the exception described in Life estate with power of appointment, later, or if your spouse is not a U.S. citizen and the total gifts you made to your spouse during the year exceed $164,000.
You must also file a gift tax return to make the qualified terminable interest property (QTIP) election described under Line 12. Election Out of QTIP Treatment of Annuities, later.
Except as described earlier, you do not have to file a gift tax return to report gifts to your spouse regardless of the amount of these gifts and regardless of whether the gifts are present or future interests.
Transfers Not Subject to the Gift Tax
Four types of transfers are not subject to the gift tax. These are:
- Transfers to political organizations,
- Transfers to certain exempt organizations,
- Payments that qualify for the educational exclusion, and
- Payments that qualify for the medical exclusion.
These transfers are not “gifts” as that term is used on Form 709 and its instructions. You need not file a Form 709 to report these transfers and should not list them on Schedule A of Form 709 if you do file Form 709.
Political organizations.
The gift tax does not apply to a transfer to a political organization (defined in section 527(e)(1)) for the use of the organization.
Certain exempt organizations.
The gift tax does not apply to a transfer to any civic league or other organization described in section 501(c)(4); any labor, agricultural, or horticultural organization described in section 501(c)(5); or any business league or other organization described in section 501(c)(6) for the use of such organization, provided that such organization is exempt from tax under section 501(a).
Educational exclusion.
The gift tax does not apply to an amount you paid on behalf of an individual to a qualifying domestic or foreign educational organization as tuition for the education or training of the individual. A qualifying educational organization is one that normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on. See section 170(b)(1)(A)(ii) and its regulations.
The payment must be made directly to the qualifying educational organization and it must be for tuition. No educational exclusion is allowed for amounts paid for books, supplies, room and board, or other similar expenses that are not direct tuition costs. To the extent that the payment to the educational organization was for something other than tuition, it is a gift to the individual for whose benefit it was made, and may be offset by the annual exclusion if it is otherwise available.
Contributions to a qualified tuition program (QTP) on behalf of a designated beneficiary do not qualify for the educational exclusion. See Line B. Qualified Tuition Programs (529 Plans or Programs) in the instructions for Schedule A, later.
Medical exclusion.
The gift tax does not apply to an amount you paid on behalf of an individual to a person or institution that provided medical care for the individual. The payment must be to the care provider. The medical care must meet the requirements of section 213(d) (definition of medical care for income tax deduction purposes). Medical care includes expenses incurred for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body, or for transportation primarily for and essential to medical care. Medical care also includes amounts paid for medical insurance on behalf of any individual.
The medical exclusion does not apply to amounts paid for medical care that are reimbursed by the donee’s insurance. If payment for a medical expense is reimbursed by the donee’s insurance company, your payment for that expense, to the extent of the reimbursed amount, is not eligible for the medical exclusion and you are considered to have made a gift to the donee of the reimbursed amount.
To the extent that the payment was for something other than medical care, it is a gift to the individual on whose behalf the payment was made and may be offset by the annual exclusion if it is otherwise available.
The medical and educational exclusions are allowed without regard to the relationship between you and the donee. For examples illustrating these exclusions, see Regulations section 25.2503-6(c).
Qualified disclaimers.
A donee’s refusal to accept a gift is called a disclaimer. If a person makes a qualified disclaimer of any interest in property, the property will be treated as if it had never been transferred to that person. Accordingly, the disclaimant is not regarded as making a gift to the person who receives the property because of the qualified disclaimer.
Requirements.
To be a qualified disclaimer, a refusal to accept an interest in property must meet the following conditions.
- The refusal must be in writing.
- The refusal must be received by the donor, the legal representative of the donor, the holder of the legal title to the property disclaimed, or the person in possession of the property within 9 months after the later of:
- The day the transfer creating the interest is made, or
- The day the disclaimant reaches age 21.
- The disclaimant must not have accepted the interest or any of its benefits.
- As a result of the refusal, the interest must pass without any direction from the disclaimant to either:
- The spouse of the decedent, or
- A person other than the disclaimant.
- The refusal must be irrevocable and unqualified.
The 9-month period for making the disclaimer is generally determined separately for each taxable transfer. For gifts, the period begins on the date the transfer is a completed transfer for gift tax purposes.
Annual Exclusion
The first $16,000 of gifts of present interest to each donee during the calendar year is subtracted from total gifts in figuring the amount of taxable gifts. For a gift in trust, each beneficiary of the trust is treated as a separate donee for purposes of the annual exclusion.
All of the gifts made during the calendar year to a donee are fully excluded under the annual exclusion if they are all gifts of present interest and they total $16,000 or less.
Does Form 709 Need To Be Filed With 1040? – IRS 2023