Individuals who made gifts during 2021 might have to file a gift tax return when filing their federal income tax returns. Here are situations in which Form 709, “United States Gift (and Generation-Skipping Transfer) Tax Return,” must be filed and how to handle of hard-to-value assets.

To File or Not to File?

In general, you must file Form 709 if you gave gifts exceeding the $15,000 annual gift tax exclusion to any person in 2021, other than your spouse. (The annual gift tax exclusion will increase to $16,000 per person for 2022.) This form does not need to be filed if you didn’t give more than $15,000 last year to any individual.

Married couples were able to make joint gifts of up to $30,000 per person in 2021 (increasing to $32,000 person in 2022) without owing any gift tax. Gifts of jointly held property or community property are treated as though they were made equally (50%) by both spouses. So, you won’t have to file a gift tax return, unless you gave an individual more than $30,000 from a joint account or community property asset.

Likewise, if you made tax-deductible gifts to qualified charitable organizations in 2021, you generally don’t have to file a gift tax return as long as you transferred your entire interest in the donated property.

For example, you need to file Form 709 if you want to affirmatively opt out of the automatic allocation of Generation Skipping Tax Exemption to GST Trusts which you made gifts to during 2021.

To Appraise or Not to Appraise?

Some gifted assets may be hard to value yourself. Examples of these assets are collectibles, partial interests in real estate or stock in a family-owned business. With hard-to-value assets, you might want to file a gift tax return — even if it’s not required by the IRS — to start the statute of limitations on IRS challenges to the value of those gifts.

Appraisals aren’t needed for gifts of cash or marketable securities that are actively traded on the public markets. However, you generally will need a timely, independent appraisal by a qualified appraiser for sizable gifts of assets for which there is no ready market. In some cases, these values may be subject to valuation discounts. A third-party appraisal can provide important documentation if the IRS challenges the value of a gift on Form 709.

Need Advice?

The deadline for filing (or extending) Form 709 and paying any gift tax due is April 18, 2022, for tax year 2021. When in doubt about whether to file a gift tax return or to obtain an appraisal for gifted or donated assets, contact us. Our tax pros can help you get it right.