IRC 2513 Gift-Splitting Rules: Identifying Gifts Requiring Non-Pro Rata Allocations

IRS Form 709 Gift (And Generation Skipping Tax) Return is one of the more complex of all commonly encountered tax filings. For many taxpayers and even some advisers, simply determining whether a transfer qualifies as a reportable gift is a challenge. Even tax professionals with experience in preparing the form can be stumped by the more complicated aspects of reporting these transfers.

One of the most difficult tests is navigating the gift-splitting rules of Section 2513. The rules allow a married couple to treat the total value of a gift as split between them, increasing their total gift tax exemption. In instances of gifts to individuals, the gift-splitting rules are straightforward in operation; however, when gifts are made to certain trust vehicles, the application does not always allow an equal split.

If a spouse makes a gift to a non-zeroed-out GRAT in which the spouse is a beneficiary of the remainder interest, the gift-splitting election will only be effective to the extent that the non-spouse beneficiaries’ interest is ascertainable and severable from the interest given to the spouse at the time of the gift.

Gifts to some trusts, such as irrevocable life insurance trusts, that feature Crummey powers also present challenges in navigating the gift-splitting rules. Tax advisers completing fiduciary returns must understand the specifics of the gift-splitting rules to avoid costly tax consequences.

Listen as our experienced panel provides a thorough and practical guide to the complexities of gift-splitting rule elections, calculations, and tax reporting on Form 709.

1. Section 2513 Gift-Splitting default rules
   1. ’All-or-nothing” rule on gift splitting
   2. Consent issues
   3. Impact of powers of appointment
   4. Valuation of remainder interests
2. Gift-splitting treatment of gifts to trusts where non-donor spouse has remainder interests
3. Crummey Trusts
4. Calculations of split gifts where the allocation is other than pro rata between gifting and non-gifting spouse
5. Reporting unequal gift splits on Form 709

The panel will discuss these and other issues:

• Under what gift scenarios would gift splitting generate a negative impact on the nongrantor spouse?
• What is the impact of a non-donor spouse having a Crummey power in an irrevocable trust on gift-splitting calculations and exemption allocations?
• Recognizing and calculating gift splits when the required allocation differs from a pro rata division
• Identifying when a remainder interest is “ascertainable and severable”

Learning Objectives

After completing this course, you will be able to:

• Recognize gift scenarios where the gift-splitting rules require a non pro rata allocation
• Identify the impact of Crummey powers on gift-splitting allocations
• Discern when taxpayers should not elect gift splitting under Section 2513 provisions
• Determine how to calculate non pro rata gift-spliting allocations and report on Form 709

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business or public firm experience at mid-level within the organization, preparing complex tax forms and schedules, supervising other preparers/accountants. Specific knowledge and understanding of gift tax reporting requirements, specific knowledge of generation-skipping tax rules; familiarity with gift tax lifetime exclusions, familiarity with rules covering allocation of GST exemptions.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).