In Year 1, a married couple agrees to gift split. One spouse gives $50,000 cash to their son. Assume the annual gift tax exclusion is $18,000 per donee. What is the amount of the taxable gift for the donor spouse?

Answer options:

$7,000

$14,000

$25,000

$32,000

How to approach this question

1. Split the gift: $50,000 / 2 = $25,000 per spouse. 2. Apply exclusion: $25,000 - $18,000 = $7,000 taxable gift per spouse.

Full Answer

A.$7,000✓ Correct

IRC §2513. Gift splitting allows the $50,000 gift to be treated as $25,000 from each spouse. Each spouse applies their $18,000 annual exclusion (IRC §2503(b)). Taxable gift per spouse = $25,000 - $18,000 = $7,000.

Common mistakes

Applying the exclusion to the total before splitting, or forgetting the exclusion entirely.

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