You make the callBy: National Association of Tax Professionals
November 23, 2022

Question: Your client, Mark, is the sole owner of an S corporation. He lives in a non-community property state with his wife and daughter. Mark would like to gift some of the stock in his S corporation to his daughter this year. He would like to give the maximum amount possible without triggering a reportable gift transaction. When he gifts the stock to his daughter, can he and his wife elect to split the gift between them to double the annual gift tax exclusion amount?

Answer: Yes. To qualify for gift-splitting, three requirements must be met [§2513(a)]:

  1. The spouses must be legally married to each other at the time the gift is made. Gifts made prior to divorce or death of a spouse are eligible as long as the surviving spouse (or either spouse, in the case of a divorce) does not remarry during the tax year.

  2. Both spouses must be U.S. citizens or residents on the date of the gift.

  3. One spouse may not create a general power of appointment in the other spouse over the property transferred.

Because Mark and his wife meet all three requirements, they may elect gift-splitting in this case, even though Mark is the sole owner of the S corporation stock.

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penAbout National Association of Tax Professionals

The National Association of Tax Professionals (NATP) is the largest association dedicated to equipping tax professionals with the resources, connections and education they need to provide the highest level of service to their clients. NATP is comprised of over 23,000 leading tax professionals who believe in a superior standard of ethics and exemplify professional excellence. Members rely on NATP to deliver professional connections, content expertise and advocacy that provides them with the support they need to best serve their clients. The organization welcomes all tax professionals in their quest to continually meet the needs of the public, no matter where they are in their careers.

The NATP headquarters is located in Appleton, WI. To learn more, visit www.natptax.com.

Information included in this article is accurate as of the publish date. This post is not reflective of tax law changes or IRS guidance that may have occurred after the date of publishing.

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