Calculation of the Gift Tax

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Calculation of the Gift Tax
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• Step 1 Determine amount of aggregate taxable
  gifts (prior and current taxable gifts.
  2502(a)(1)
• Step 2 Determine tentative gift tax on
  aggregate taxable gifts.
• 2502(a)(1) 2001(c)
• Step 3 Determine amount of prior taxable
  gifts. 2502(a)(2)
• Step 4 Determine TT on prior taxable gifts.
  2502(a)(2) 2001(c)

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• Step 5 Subtract TT on prior TG from TT on
  aggregate taxable gifts. 2502(a)
• Step 6 Arrive at tentative gift tax
• Step 7 Apply applicable credit amount
• 2505(a)(1)/2010(c)/2001(c)
• Step 8 Apply prior credits taken
• 2505(a)(2)
• Step 9 Calculate net ACA

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• Step 10 Subtract net ACA from Tentative Gift
  Tax.
• Arrive at gift tax payable

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Example

• Darren makes a taxable gift of 500,000 in
• 2001. Darren has not made any taxable gifts
• prior to 2001.
• Taxable gift 500,000
• TT on 500,000 gift 155,800
• ACA (345,800)
• Gift tax 0

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• Dan makes another taxable gift in 2002 of
• 600,000.
• Step 1 Determine aggregate sum of taxable
  gifts for current and prior years.
• Current TG - 600,000
• Prior TG 500,000
• Aggregate TG 1,100,000

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• Step 2 Calculate TT on aggregate TG
• Aggregate TG 1.1 M
• TT on 1.1 M 386,800

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• Step 3 Prior years TG - 500,000
• Step 4 TT on prior taxable gift of
  500K 155,800
• Step 5 Subtract TT on prior TG
• from TT on cumulative TG
• Cumulative TG 386,800
• Prior TG - 155,800
• Step 6 TT on current TG 231,000

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• Step 7 Apply credit - 345,800
• Step 8 less credits taken (155,800)
• Step 9 Available ACA 190,000
• Step 10 Gift tax due
• 231,000 (TGT)
• 190,000 (avail. ACA)
• 41,000 gift tax due