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)]:
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.
Both spouses must be U.S. citizens or residents on the date of the gift.
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.
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. All taxpayer circumstances are different, and NATP recommends contacting research services if you have specific questions about your clients’ tax situations.