When to file form 709?

If you are

  • Resident or
  • Nonresident giving U.S. property

who

  • gives a gift of present interest more than annual exclusion ($14,000 for 2013-2017, $15,000 for 2018) to one person or
  • gives a gift of future interest of amount or
  • makes elections to split gift with spouse (each has a annual exclusion amount)

Then you need file form 709, but filing gift return does not mean that you need pay gift tax.

When to pay tax?

When accumulated amount (after annual exclusion) is more than life time exclusion ($5,490,000 for 2017, $11,180,000 for 2018), you pay gift tax at 40% (2017) gift tax, and additional generation skip tax (40% as well, 2017) if gift is for a generation skip person (grand children and below). US citizens and resident aliens have the same life time exclusion.

How to report?

  • Charitable gift is fully excluded but need to report.
  • Generation Skip gift needs separately reported because it is subject to additional GST tax.
  • Gift for medical purpose paid directly to hospital and nursing home needs not report.
  • Gift for education paid directly to institution needs not report.
  • Gift to the US citizen spouse has unlimited deduction and needs not report.

P.S. A “U.S. person” who received more than $100,000 from a nonresident (your parent as an example) needs to file Form 3520. The $100,000 limit is for the amount received by one “U.S. person” from one nonresident. However, if the givers are related, then they should be regarded as one person per Instructions for Form 3520. Only the spouse who exceeded the limit needs for file form 3520. When both spouses exceeded the limit, they file separate forms 3520 and “check the box if you are married and filing a joint 2017 income tax return, but you are filing separate Forms 3520” on the form, the box has been changed in 2018 to “filing joint Forms 3520” and filing is only available for “beneficiaries of the same foreign trust”, so in 2018 (and beyond perhaps) we don’t check the box.