Begin by reviewing the tax return scenario below. Then, prepare 2016 gift tax returns (Form
709) for both of the Smiths to compute the total taxable gifts (line 3) for Robert and Angela. Stop
with line 3 of page 1, but complete pages 2 and 3 of the return.
Robert F. and Angela M. Smith, ages 70 and 65, are retired physicians who live at 842 Randolph
Street, Arlington, Texas 76909. Their 3 adult children (Albert Smith, Daniel Smith, and Ashley
Turner) are mature and responsible people. The Smiths have heard that some in Congress have
proposed lowering the Federal gift tax exclusion to $3 million. Although this change likely will
not occur, the Smiths feel they should take advantage of the more generous exclusion available
under existing law. Thus, the Smiths make transfers of many of their high value investments.
These and other gifts made during 2016 are summarized below:
Donor
Asset transfer Robert Angela
Condominium located in Dallas (TX) acquired in 1999, cost $1.2 million, to Albert, Daniel, and Ashley as equal tenants in common. $1,950,000 $1,950,000
Office building, located in Austin (TX) built in 2001, cost $1.8 million, to Albert, Daniel, and Ashley as equal tenants in common. $2,200,000 $2,200,000
Vacation ranch in San Antonio (TX) inherited by Robert from his father in 1996, value then $900,000, to Albert, Daniel, and Ashley as equal joint tenants with right of survivorship. $2,650,000 $0
Angela used her separate property to reimburse her father
(Mark Johnson) for his heart bypass operation. $0 $84,000
Paid for daughter’s (Ashley’s) wedding to Samuel Richards. $25,000 $25,000
Robert used his separate property to purchase a new automobile (Mercedes) as a graduation present (from medical school) for his favorite niece (Irene Jackson) $41,000 $0
An election to split gifts is made. The Smiths have made no taxable gifts in prior years. Relevant
Social Security numbers are 123-45-6789 (Robert) and 123-45-6788 (Angela). Remember, you
will be submitting (2) 709 forms, one for Robert F. Smith and one for Angela M. Smith.
