Problem 25-45 (LO 25-2) For the holidays, Marty gave a watch worth $24,800 to Em

Question

Problem 25-45 (LO 25-2)

For the holidays, Marty gave a watch worth $24,800 to Emily and jewelry worth $53,000 to Natalie.

Required:

Has Marty made any taxable gifts this year and, if so, in what amounts?

Assume Marty is married to Wendy and they live in a community property state. What are the amounts, if any, of their taxable gifts?

(For all requirements, leave no answer blank. Enter zero if applicable.)

a. Marty's taxable gift to Emily Marty's taxable gift to Natalie b. Marty's taxable gift to Emily Marty's taxable gift to Natalie Wendy's taxable gift to Emily Wendy's taxable gift to Natalie

Explanation / Answer

Answer: Annual exclusion for gifts in 2017 is $14000.

For each gift paid we can exclude $14000 to calculate the taxable amount.

After reducing $14000 from both

Marty's taxable gift to Emily is $24800 - $14000 = $10800

Marty's taxable gift to natalie is $53000- $14000 = $39000

Answer B: If the gifts are from the community property or marty and his spouse decides to split between them.

Gifts given to Emily by Marty and his spouse : $12800 each

Gifts given to Natalie by Marty and his spouse : $26500 each

Applying the annual exclusion of $14000,

Neither Marty nor Wendy made taxable gifts to Emily

Marty's taxable gift to Emily $0

Marty's taxable gift to Natalie $26500 - $14000 = $12500

Wendy's taxable gift to Emily $0

Wendy's taxable gift to Natalie $26500 -$14000 = $12500

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