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When is a Federal Gift Tax Return (Form 709) Required?

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When you make a gift of any significant value to another person, when do you need to file a Federal Gift Tax Return (Form 709)?  The answer depends on the gift’s value, and sometimes other considerations.

Usually, you need to file a 709 for a given calendar year only if you give any person, during that year, a gift worth more than the annual gift tax exclusion amount for that year.  The term “annual gift tax exclusion amount” might mean more to you if described this way:  for many years, you could give $10,000 to any person during any calendar year without having to file a 709 or pay federal gift tax.  The $10,000 figure started being indexed for inflation in 2002, in increments of $1,000 every few years.  The 2017 amount is $14,000, but the 2018 amount will be $15,000.  So, in general, if you made a gift of $14,000 or less to any one person in 2017, you don’t need to file a 709.  And if you made gifts of $14,000 each to 20 of your family members or friends in 2017, you still don’t need to file a 709—remember that the exemption (“annual exclusion amount”) is the amount you can give to each person in each calendar year.  For calendar years after 2018 (when, again, the exemption will be $15,000), make sure you know what the exemption amount is or was for that calendar year to determine whether you should file a 709 for that year.

Sometimes, though, a gift is difficult to value.  If you gift ownership units in a small company, for example, you should get a current appraisal (as of the date of gift) to see whether you need to file a 709.  Even if your appraisal puts the value of the gift at less than the annual exclusion amount for that year, another reason to consider filing a 709 anyway is to prevent later IRS challenges.  The statute of limitations—the deadline for the IRS to contest the amount you claim a gift was worth—doesn’t even begin to run for the IRS if you don’t file a 709.  If in doubt, it may be wise to go ahead and file the 709 anyway.

Consult your estate planning advisors with any questions.  Visit The Connolly Gallagher Trust & Estate page by clicking here.

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