56-439 disallows
gift splitting on transfers to trusts if the donor's spouse is a potential beneficiary of the trust.
If this is not practical, the spouses can get the benefit of a $30,000 annual exclusion by electing "
gift splitting" on Form 709.
"What you really have to do," he said, "is put your head around the whole transaction." Reviewing the trust document is particularly important, he said, as is the issue of
gift splitting, which may require filing two separate returns, one for the donor spouse and one for the non-donor spouse.
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Gift Splitting Election--The regulations provide great detail describing how mitigation operates where spouses have elected to gift split under I.R.C.
David Pratt of Pratt & Bucher, LLP, spoke at the Greater Fort Lauderdale Tax Council meeting; his speech was entitled "The Anatomy of the New Federal Gift Tax Return, Including a Review of the Gift Tax Statute of Limitations,
Gift Splitting Provisions and Proposed Regulations Regarding the Election out of the Automatic Allocation of Generation-Skipping Transfer Tax Exemption." Pratt and Jennifer Zakin also spoke at the Boca Raton Tax Institute meeting.
Married couples also have the option of "
gift splitting," which allows one spouse to make the entire gift, up to $22,000, provided the donor's spouse consents to applying his or her $11,000 annual exclusion to the gift.
It covers annual gift tax exclusion, exclusion for payment of tuition and medical expenses,
gift splitting, and tax return filing requirements.
Unfortunately, due to the limitations of the annual exclusion $10,000 ($20,000 with
gift splitting), business owners often find this method impractical.