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Question: George and Martha, a married couple both aged 60 and in excellent health, have made several gifts in 2022.

18 Feb 2023,2:23 PM


George and Martha, a married couple both aged 60 and in excellent health, have made several gifts in 2022. Their accountant is helping them decide whether to choose gift splitting. If they don't opt for gift splitting, George will have $2 million in taxable gifts, and Martha will have $14 million in taxable gifts. All gifts are remainder interests to their relatives. George has not made any previous taxable gifts, while Martha made $250,000 in taxable gifts in 2009.


  1. Calculate the amount of gift tax each spouse will owe if they elect gift splitting and if they do not elect gift splitting for 2022.
  2. What would be the tax payable for the $20M taxable gift



Expert answer


To determine the amount of gift tax each spouse will owe, we need to calculate the tax payable for both scenarios: with and without gift splitting. If they opt for gift splitting, they will combine their gifts and divide them equally, resulting.....

To determine the amount of gift tax each spouse will owe, we need to calculate the tax payable for both scenarios: with and without gift splitting. If they opt for gift splitting, they will combine their gifts and divide them equally, resulting in each spouse having $8 million in taxable gifts for 2022. On the other hand, if they do not elect gift splitting, George's $2 million in taxable gifts will be taxed at a rate of 18%, resulting in a gift tax of $360,000. Martha's $14 million in taxable gifts will be taxed at a rate of 40%, resulting in a gift tax of $5.6 million.


Assuming the taxable gift is $20 million, the gift tax payable will depend on whether gift splitting is elected. If they choose gift splitting, each spouse will have $10 million in taxable gifts, resulting in a gift tax of $3.6 million for George and $8 million for Martha, for a total gift tax of $11.6 million. If they do not elect gift splitting, George's $2 million in taxable gifts will be taxed at a rate of 18%, resulting in a gift tax of $360,000. Martha's $18 million in taxable gifts will be taxed at a rate of 40%, resulting in a gift tax of $7.2 million, for a total gift tax of $7.56 million.


To determine the amount of gift tax each spouse will owe, we need to calculate the tax payable for both scenarios: with and without gift splitting. If they opt for gift splitting, they will combine their gifts and divide them equally, resulting in each spouse having $8 million in taxable gifts for 2022. On the other hand, if they do not elect gift splitting, George's $2 million in taxable gifts will be taxed at a rate of 18%, resulting in a gift tax of $360,000. Martha's $14 million in taxable gifts will be taxed at a rate of 40%, resulting in a gift tax of $5.6 million.


Assuming the taxable gift is $20 million, the gift tax payable will depend on whether gift splitting is elected. If they choose gift splitting, each spouse will have $10 million in taxable gifts, resulting in a gift tax of $3.6 million for George and $8 million for Martha, for a total gift tax of $11.6 million. If they do not elect gift splitting, George's $2 million in taxable gifts will be taxed at a rate of 18%, resulting in a gift tax of $360,000. Martha's $18 million in taxable gifts will be taxed at a rate of 40%, resulting in a gift tax of $7.2 million, for a total gift tax of $7.56 million.

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