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PART 3—TIME SCHEDULE/COURSE OUTLINE

PART 3—COURSE OUTLINE

1. Introduction: Purpose, nature, and scope of the federal gift tax law
   1. Purpose of gift tax law
   2. Nature of gift tax law
   3. Scope of gift tax law

2. Tax advantages of lifetime gifts
   1. $10,000 annual exclusion
      • Unlimited number of donees
      • Gift splitting

   2. Avoidance of gross-up rule
   3. Removal of appreciation from donor’s estate
      • Potential estate, probate, and inheritance tax savings

   4. Income tax savings
   5. Estate tax savings and deferral
   6. No gift taxes paid until unified credit exceeded

3. Allowable reductions for gift tax
   1. Gift splitting
      • Limited to married donors
      • Artificial mechanism
      • Limited to noncommunity property

   2. The annual exclusion
      1. Purpose of the exclusion
      2. Effect of gift splitting coupled with exclusion
      3. Present versus future interest
         • In general

           –	Present interest—an immediate, unfettered, and ascertainable right to use, possess, and enjoy the gift
           –	Future interest—a deferred right to use, possess, and enjoy the gift
           –	Determines qualification for annual exclusion
           –	Splitting gifts between present and future
           –	Trust involvement

         • Gifts of life insurance
           
           

           –	Policy cash value unnecessary
           –	No donee limitations

         • Gifts of life insurance to trusts
         • Crummey powers

           –	Necessary for beneficiaries to have present interest
           –	Beneficiary demand powers
           –	Ratable
           –	Beneficiary notification

      4. Identity of donees
         • Possible aggregation of gifts
         • Multiple gifts

      5. Gifts to minors
         • In general
         • IRC Sec. 2503(b) trust

           –	Income distribution required
           –	Principal distribution less restricted

         • IRC Sec. 2503(c) trust

           –	Distribution of income and principal at majority
           –	Distribution of income and principal at majority
           –	Possible trust management after majority

         • Uniform Gifts (Transfers) to Minors Act

           –	Simple to use
           –	Possible property limitations

      6. How type of asset affects exclusions
      7. Summary of rules for ascertaining the amount and availability of the gift tax annual exclusion
         • Gifts in trust
         • Annual distribution of income
         • Noncontingent upon survivorship
         • No trustee discretion
         • Ascertainable value

   3. Exclusion of transfers for educational and medical expenses
      • Unlimited amounts
      • Unrelated to annual exclusion
      • Payment direct to provider

   4. Gift tax marital deduction
      1. Requirements to qualify for gift tax marital deduction
         • Spouse recipient
         • U.S. citizenship
         • Not a terminable interest

      2. Lifetime gifts to an alien spouse
         • Annual-exclusion qualification
         • Gift tax marital-deduction qualification

   5. The gift tax charitable deduction
      • Qualified-charity definition
      • Gifts in excess of annual-exclusion gifts
      • Charitable remainder gift

4. Calculating the gift tax payable
   1. Computing taxable gifts for a single donor
   2. Computing taxable gifts for a married donor with gift splitting
   3. Calculating gift tax payable
   4. Computing taxable gifts and gift tax payable with a charitable gift
   5. Calculating gift tax payable with prior years’ gifts
   6. Credits
      • Unified credit
      • Gift tax credit

5. Reporting gifts and paying tax
   1. Future-interest gifts
   2. Present-interest gifts
   3. Gifts to charities
   4. Liability for payment
      • Liability rests with donor
      • Payment extension for undue hardship

6. Relationship of the gift tax system to the income tax system
   • Inconsistency of gift and income tax systems

7. Inconsistency of gift and income tax systems
   • Basis carryover
   • Addition to basis for gift tax paid

8. Relationship of the gift tax system to the estate tax system
   • Unified tax rates
   • Unified tax credit
   • Addition of post-1976 gifts to taxable estate
   • Inconsistencies

9. Gift selection factors
   1. Property’s appreciation potential
      • Attempt to remove appreciation value
      • Life insurance

   2. Income-splitting potential
      • Transfer of high-income-producing property versus low-yield property

   3. Property subject to indebtedness
   4. Donor’s preferences on use of the property
      • Nonrecognition of capital-loss potential
      • No gift tax addition to basis aspect
      • Retention of property for stepped-up basis
      • Avoidance of capital-gain consideration
      • Beneficiary’s likelihood of selling property

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