Matthew and Addison are married and live in Michigan, a common-law state. For the holidays Addison gave cash gifts of $40,000 to each of her two sons, and Matthew gave $40,000 to his daughter. What is the amount of Addison's taxable gifts if Matthew and Addison opt to gift-split?

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Quizplus · Accepted Answer

In this scenario, Matthew and Addison can opt to gift-split the cash gifts. This means that each of them will be treated as if they gave half of each gift. So, Addison's $40,000 cash gifts to her sons will be treated as if she gave $20,000 from her own assets, and $20,000 from Matthew's assets. Similarly, Matthew's $40,000 cash gift to his daughter will be treated as if he gave $20,000 from his own assets, and $20,000 from Addison's assets.

Therefore, the total taxable gifts for Addison would be $20,000 (her half of the cash gifts to her sons). This is below the annual gift tax exclusion amount of $15,000 per recipient, so her gifts would not be subject to gift tax.

Matthew and Addison Are Married and Live in Michigan, a Common-Law