In 2024 Priya Nandakumar makes a single cash gift of 50,000 dollars to her son. Her husband, Aditya, makes no gifts of his own, and the couple validly elects to split all gifts for the year. The annual exclusion for 2024 is 18,000 dollars per donee. After applying the gift-splitting election and the annual exclusion, what taxable gift does each spouse report on their own Form 709?
- A32,000 dollars, treating the full 50,000 dollars gift as made by one donor and subtracting a single 18,000 dollars annual exclusion.
- B25,000 dollars, splitting the gift into two halves of 25,000 dollars each but omitting the annual exclusion entirely.
- C14,000 dollars, which is the gift remaining after both spouses' annual exclusions are subtracted from the full 50,000 dollars gift.
- D7,000 dollars, halving the gift to 25,000 dollars per spouse and subtracting each spouse's 18,000 dollars annual exclusion. Correct
Why A is wrong: This is the result of ignoring the split and applying one exclusion to the whole gift (50,000 minus 18,000), which both fails to halve the gift and produces a figure no single spouse would report after a valid election.
Why B is wrong: This correctly halves the gift to 25,000 dollars per spouse but then forgets to subtract the 18,000 dollars annual exclusion each donor is entitled to, overstating the taxable gift.
Why C is wrong: This is the combined taxable gift of both spouses (50,000 minus two 18,000 dollars exclusions, or 7,000 dollars each), not the amount a single spouse reports, so it confuses the per-spouse figure with the couple's total.
Why D is correct: Correct. Splitting attributes 25,000 dollars to each spouse, and each then applies an 18,000 dollars annual exclusion, leaving a taxable gift of 7,000 dollars reported on each spouse's own Form 709.