This time of year, we often get questions on the tax consequences of cash gifts to kids.

We can illustrate how this works with a very simple example.  Let’s say Bob is a single parent and wants to give his son $20,000 for Christmas this year.

Bob is the one responsible for reporting the gift in 2016.  Bob’s son has no taxable consequence and no filing requirement for the gift.

Bob will have to file Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, no later than April 17, 2017.  This form is required because the gift exceeded the annual gift exclusion of $14,000 for 2016.  Bob will show the $20,000 gift amount on the return as well as the name and social security number of the recipient.  The return will reflect the gift exclusion of $14,000 and show the remaining $6000 as a taxable gift, but no gift tax is due as long as Bob has not used his allowable lifetime exclusion of $5,450,000 for 2016.

The Form 709 is informational return for the IRS and is only required when gifts exceed the annual excluded gift amount or if a taxpayer has already used his allowable lifetime exclusion.

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