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Old 09-29-2014, 01:02 PM
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New Twist on Gift Tax Exclusion

My friend had an investment account set up for her by her father back in 1996. In 2014 she cashed out the account, resulting in some gain (roughly $20,000). She then took the entire amount and gifted everything to me. I know the annual gift tax limit for 2014 is $14,000, but the lifetime gift amount could still cover this full gift since it has not been exhausted yet.

The twist is this....the reason she cashed out the account and gifted the funds to me was so I could pay for our wedding. At the end of the year we will be married, and I know we file as married for the full year, but I was wondering how this affected the gift tax rules.

Basically, I wanted to know about the gain included in the sale of the securities in the account. Do we need to pay taxes on the gain? Or since it will be covered by the gifted amounts, will the gain be tax free? Does the wedding (even though it was after the gift occurred) cause any hiccups in the standard gift tax process? I had assumed we simply file the 709 like normal, and showed the reduction in the lifetime gift amount, but just wanted to check and see if there would be any hidden taxes or problems.

Thanks in advance for any help/guidance.



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Old 09-30-2014, 05:11 AM
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Originally Posted by KGreer View Post
My friend had an investment account set up for her by her father back in 1996. In 2014 she cashed out the account, resulting in some gain (roughly $20,000). She then took the entire amount and gifted everything to me. I know the annual gift tax limit for 2014 is $14,000, but the lifetime gift amount could still cover this full gift since it has not been exhausted yet.

The twist is this....the reason she cashed out the account and gifted the funds to me was so I could pay for our wedding. At the end of the year we will be married, and I know we file as married for the full year, but I was wondering how this affected the gift tax rules.

Basically, I wanted to know about the gain included in the sale of the securities in the account. Do we need to pay taxes on the gain? Or since it will be covered by the gifted amounts, will the gain be tax free? Does the wedding (even though it was after the gift occurred) cause any hiccups in the standard gift tax process? I had assumed we simply file the 709 like normal, and showed the reduction in the lifetime gift amount, but just wanted to check and see if there would be any hidden taxes or problems.

Thanks in advance for any help/guidance.
Basically, I wanted to know about the gain included in the sale of the securities in the account. Do we need to pay taxes on the gain?=====>>no; however, as you said, the amount of the funds gifted to you exceeds $14K, the annual gift tax limit for 2014, she needs to file form 709 with the IRS; also unless her lifetime gift amount exceeds $5.45 M for 2014, she has no gift tax liability with the IRS.aslongas she gifts the funds to you after marriage then no need to file form 709 as a married couple.

Or since it will be covered by the gifted amounts, will the gain be tax free? >>

As mentioned above;

Does the wedding (even though it was after the gift occurred) cause any hiccups in the standard gift tax process? I had assumed we simply file the 709 like normal, and showed the reduction in the lifetime gift amount, but just wanted to check and see if there would be any hidden taxes or problems=>>>She , as a donor, needs to file form 709; you are not liable for taxes on the gifted funds of $20K as a done.



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Old 09-30-2014, 09:28 AM
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Thank you for the help! I really appreciate it.



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