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Can I make a tax-free gift to my spouse?

Dear Tax Talk,
If a couple decides to sell a piece of real estate, can one spouse use the money to make a tax-free gift to the other? If so, how much of that gift is tax-free? -- Amy

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Dear Amy,
In marriage, what's yours is his and vice versa and the IRS agrees. There is no limit on the gifts that a married couple can make to each other, provided both are U.S. citizens.

A few years ago, Congress became concerned that a noncitizen spouse may return to his country after a U.S.-domiciled spouse dies and take all of the accumulated wealth out of the reach of U.S. estate tax. Accordingly, a limit was placed on the amount that a U.S. citizen or domiciled resident can gift to a noncitizen spouse. Although the estate tax is slowly being repealed, this limit has not been changed.

The normal annual gift limit of $11,000 still applies to gifts to persons other than your spouse. The $11,000 limit for outright gifts is increased to $114,000 annually for gifts to a noncitizen spouse from a U.S.-domiciled spouse. An outright gift is generally a gift that becomes the property of the recipient immediately, rather than in the future. Gifts greater than this annual limit should be reported on Form 709. The annual excess gifts would be applied to the U.S.-domiciled spouse's lifetime gift exclusion of $1,000,000. Form 709 is due by the due date of your annual Form 1040 for the year of the gift.

Bankrate.com's corrections policy
-- Posted: June 7, 2005
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