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Lev, Tax Advisor
Category: Tax
Satisfied Customers: 29919
Experience:  Taxes, Immigration, Labor Relations
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A couple wish to gift their children as much as they can tax

Customer Question

A couple wish to gift their children as much as they can tax free. One spouse is a resident alien, the other an American citizen. The assets are not community property and belong primarily to the American spouse.Question: can they jointly gift 10.9M (2016 taxfree amount) while both spouses are still living?Secondary questions: If not while they are both still alive, can they gift 10.9M to the children when the first spouse dies? When the survivor spouse dies? Perhaps by taking advantage of portability or a Q-dot trust? Or must the alien spouse take American nationality for the couple to be able to gift more than the 5.45M allowable tax free for one U.S. citizen?Note that this is NOT about a gift to the alien spouse, but only about a gift to their American-citizen children.
Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.
In the US - gift - is not taxable income for the recipient and you do not need to be reported to the IRS.There is no any amount limit. Please see for reference IRS publication 525 page 31 left column - - and inheritances. In most cases, property you receive as a gift, bequest, or inheritance is not included in your income. However, if property you receive this way later produces income such as interest, dividends, or rents, that income is taxable to you..So children as recipients for gifts will NOT have any income tax liability and will not report the gift..In additional - while the gift is not a taxable income and is NOT reported on the tax return - the donor might be required to file a gift tax return (form 709) when the gift is above filing threshold ($14,000 per person per year) - but most likely - you will not have any gift tax liability (based on the lifetime exclusion that is above $5,450,000 fro 2016)..
Expert:  Lev replied 1 year ago.
Now - your specific questions...Question: can they jointly gift 10.9M (2016 tax free amount) while both spouses are still living?When assets are NOT community property - for gift tax purposes - each spouse will gift assets owned by that spouse and will file separate gift tax return.There is NO joint gift tax return."still alive" is a requirement for having a gift transaction - after the person dies - there may not be a gift.Secondary questions: If not while they are both still alive, can they gift 10.9M to the children when the first spouse dies?If the spouse passes away - all assets are distributed as inheritance - not as a gift. They may be passed to the spouse OR to children - according to the Will.The $5,450,000 exclusion for 2016 is applies either to gifts or to the estate.If taxable gifts were made during the lifetime - the remaining exclusion may be applied to the estate to be excluded for estate tax purposes..I appreciate if you take a moment to rate the answer.Experts are ONLY credited when answers are rated positively.If you still have any doubts, need clarification - please be sure to ask.I am here to help you with all tax related issues.