IRS Posts Draft 2012 Gift Tax Return (Form 709)
Managing Director & Head of Wealth Advisory
Lazard Wealth Management LLC
On September 18, the IRS posted a draft 2012 Gift Tax Return.
The New Draft Form 709
There is a new line in Part 1 (Line 19), which asks:
"Have you applied a DSUE amount received from a predeceased spouse to a gift or gifts reported on this or a previous Form 709?"
If the answer is yes, there is a box to check and a direction to complete new Schedule C - Deceased Spousal Unused Exclusion (DSUE) Amount.
The tax computation (line 7 of Part 2) now refers to the maximum applicable credit amount (formerly unified credit amount), which factors in any DSUE amount from a predeceased spouse, computed on the new Schedule C.
Schedule C is for reporting the DSUE amount received from a last deceased spouse, as well as the DSUE received from other predeceased spouse(s) and used by the donor.
Although there are several references to "see instructions" on the draft form, the instructions have not yet been issued.
Using the DSUE during the lifetime of the surviving spouse may make good sense given:
- If the surviving spouse remarries and the next spouse dies, any remaining DSUE of the first surviving spouse will be lost, even if the last deceased spouse has no or a smaller amount of DSUE than the prior spouse;
- When the surviving spouse makes a gift, the DSUE of the last deceased spouse is applied before the surviving spouse's own exclusion amount;
- A spouse who has had more than one predeceased spouse can use the DSUE of each surviving spouse in succession, as long as the DSUE of the last deceased spouse is used before any subsequent spouse dies. There is no recapture of previously gifted amounts in which the DSUE of a prior deceased spouse was utilized. In fact, the surviving spouse can include in her applicable exclusion amount the DSUE amount of her most recently deceased spouse, even if she is then married to another individual. If the second marriage ends in divorce and the divorced spouse dies, the first predeceased spouse remains the last predeceased spouse for DSUE purposes. The divorced spouse is not considered the last predeceased spouse because he was not married to the surviving spouse at death; and
- The last deceased spouse is identified as of the date of a taxable gift by the surviving spouse.
For your information, a link to the draft Form 709 is included below:
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Copyright @ 2012. All rights reserved.
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