If a person recieves capital gains in thier name, and they trust thier wife. Can they exempt the taxes to a certain amount on a one time gift to thier spouse?
Your first part of the facts seem unclear, but generally gifts to your spouse are not taxable. The applicable exclusion amount for gift purposes is $ 1 Million and the unified tax credit for 2004 and 2005 is up to $345,000.
A Gift Tax Return Form 709 need not be filed to report a gift to a spouse, regardless of amount unless one of the following exceptions applies:
(1) the spouse is not a U.S. citizen and the total annual gifts to the spouse exceed $100,000; or
(2) the gift is of a terminable interest but does not meet the tax code requirements of a Life Estate with Power of Appointment.
However, when a person receives a capital gains form reported on Forms 1099 then that person needs to report it on their tax return, calculate and pay the appropriate taxes if any. The gifting of that amount applies to the transfer by gift (not expecting to receive something of some value in return) of any property.
As depicted on the movie "The Shawshank Redemption," written by Stephen King, the dialoge in the scene on the rooftop stated that a one time gift to your spouse can be tax exempt. Your response led me in the right direction and my question was answered. Thanks again!!
Oh, how ignorant of me for not reading Stephen King's book nor watched that movie.
On a side note, the spouse retains the same tax basis for the gift of property received when s/he finally decides to sell or exchange it for some other value, NOT it's fair market value at the time of transfer between spouse. Therefore, the gain if any remains the same as if in the hands of the donor. And there are some unique rules for lost dispositions in these circumstances between related parties down the road.
04-10-2005 01:07 AM
