Not correct.
1. correct.
2. You do NOT pay cap gains on the gift, nieither in US or Canada. The reciever will pay US cap gains at the time of sale (if in US), and you will pay cap gains in Canada.
3. Correct. I am still convinced taht the unified credit applies to you.
4. Maybe, if you elect to dispose of them.
5. No. See #2
6. No, See #2.
Gift Tax Exemption
Moderator: Mark T Serbinski CA CPA
JG, you are still not looking at the unified credit.
Here is my understanding (asuming no portion of lifetime unified credit has been used):
1. US spouse gives $10M to US spouse: Nothing to report by virtue of the unlimited spousal exemption
2. US spouse give $100K to non-US spouse: nothing to report due to less than yearly spousal gift limit
3. US spouse gives $5M to non-US spouse. Gift tax on 4.87 million, which the US spouse can then apply the lifetime unified credit to exclude the gift tax.
4. US spouse gives $6M to non-US spouse: Gift tax on 5.87 million, which 5.1 is excludabel by lifetime unified credit, leaving gift tax on $770K
Here is my understanding (asuming no portion of lifetime unified credit has been used):
1. US spouse gives $10M to US spouse: Nothing to report by virtue of the unlimited spousal exemption
2. US spouse give $100K to non-US spouse: nothing to report due to less than yearly spousal gift limit
3. US spouse gives $5M to non-US spouse. Gift tax on 4.87 million, which the US spouse can then apply the lifetime unified credit to exclude the gift tax.
4. US spouse gives $6M to non-US spouse: Gift tax on 5.87 million, which 5.1 is excludabel by lifetime unified credit, leaving gift tax on $770K
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
First to answe poster question
1) It has to be at FMW sec 69 ITA. If you gift it at less you are deemed to have received FMW no matter what and her ACB is the amount you said you received so you will be nailed, take it at FMW and use up your cap gain exemption.
2) If you are saying its a gift in the US then you are subject to gift tax.
3)NO MY INTERPRETATION IS THAT SHE IS NOT A USC SO NO MARITAL EXEMPTION.
4) yes
5)yes but to point you paid any gift tax she get a bump up in cost.
6) see 1
For Nelsona
I so not agree except for your point 2, it is very clear unless the spouse who is receiving the gift is not a USC he can not claim more than the 139K for 2012 up from 136K in 2011.
Think about this, a US citizen gifts shares to his CND spouse for say $600K in Canada pays no tax due to cap gains deduction, for US purposes claims it as a gift uses his marital exemption wife in Canada gets the shares at his cost basis he pays no tax in US or Canada. Now wife in Canada gets a step up in her cost to sat $ 600K in teh US her cost is say his original basis of $ 1 but she could not care less she is not a USC or resident and will never be taxed on this sale in her hands, that is why IRS does not give teh marital exemption to non USC spouses.
1) It has to be at FMW sec 69 ITA. If you gift it at less you are deemed to have received FMW no matter what and her ACB is the amount you said you received so you will be nailed, take it at FMW and use up your cap gain exemption.
2) If you are saying its a gift in the US then you are subject to gift tax.
3)NO MY INTERPRETATION IS THAT SHE IS NOT A USC SO NO MARITAL EXEMPTION.
4) yes
5)yes but to point you paid any gift tax she get a bump up in cost.
6) see 1
For Nelsona
I so not agree except for your point 2, it is very clear unless the spouse who is receiving the gift is not a USC he can not claim more than the 139K for 2012 up from 136K in 2011.
Think about this, a US citizen gifts shares to his CND spouse for say $600K in Canada pays no tax due to cap gains deduction, for US purposes claims it as a gift uses his marital exemption wife in Canada gets the shares at his cost basis he pays no tax in US or Canada. Now wife in Canada gets a step up in her cost to sat $ 600K in teh US her cost is say his original basis of $ 1 but she could not care less she is not a USC or resident and will never be taxed on this sale in her hands, that is why IRS does not give teh marital exemption to non USC spouses.
JG
I agree there is no marital exemption, I never claimed this.
However the Unified credit applies. You have not even mentionned the unified credit. I have not seen any documentation that says the unified credit does not apply to non-US spouse.
You have any?
However the Unified credit applies. You have not even mentionned the unified credit. I have not seen any documentation that says the unified credit does not apply to non-US spouse.
You have any?
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
I think where JG is getting confused is that a non-resident non-citizen spouse cannot gift US property and use the unified credit. This is not what we are talkking about here.
A US citizen CAN always use the unified credit (now equivalent to 5.1M of gift income), and would of course do so in this case, if the gift was in excess of $139K for 2012.
So, US-citizen spouses can receive unlimited gifts
Non-US citizen spouses can recieve from thier US citizen spouse $139K without having to report the gift, anything in excess must be reported, and the donor is free to use whatever remaining unified credit he has to wipe out the gift tax.
Discussed in good detail here:
http://www.kpmg.com/global/en/issuesand ... evies.aspx
A US citizen CAN always use the unified credit (now equivalent to 5.1M of gift income), and would of course do so in this case, if the gift was in excess of $139K for 2012.
So, US-citizen spouses can receive unlimited gifts
Non-US citizen spouses can recieve from thier US citizen spouse $139K without having to report the gift, anything in excess must be reported, and the donor is free to use whatever remaining unified credit he has to wipe out the gift tax.
Discussed in good detail here:
http://www.kpmg.com/global/en/issuesand ... evies.aspx
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
I agree I was not talking about the unified tax credit which the husband may use if its still available . The marital exemption is $ 139K for 2012 but as you say he can still draw down on his unified tax credit for the excess.
Also imprtant to note is the fact the he must use the FMW of the shares for the form 709 claculation because since he is gifting securities and not cash this has to be done at FMW which is why I saif he should use this value only.
Also imprtant to note is the fact the he must use the FMW of the shares for the form 709 claculation because since he is gifting securities and not cash this has to be done at FMW which is why I saif he should use this value only.
JG
Is this an elective process?
Gifts to spouse in Canada do not automatically trigger cap gains, in fact, ordinarily the gain is only paid by the donor at time of disposition.
Must the donor in this case elect to dispose, or does the disposition (and the cap gains exclusion) only occur at "true" disposition?
Gifts to spouse in Canada do not automatically trigger cap gains, in fact, ordinarily the gain is only paid by the donor at time of disposition.
Must the donor in this case elect to dispose, or does the disposition (and the cap gains exclusion) only occur at "true" disposition?
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
As you know Canada has no gift tax since many years, instead we have capital gains only. If the poster is to transfer by either gift or sale shares in his CCPC to his wife then this means that he has a disposition ( actual ). Its like the US gift tax its based on the FMW of the present not on some future value. He has a capital gain which is taxable at 50% then if he wants to take the CGE of $ 750K this is a precise election which takes all the factors of eligibility into consideration to see if he qualifies like I said Cumulative Net Inv Loss ( CNIL) account, lifetime limit $ 750K less amounts already claimed, and others. Also the shares themselves have to be qualifying shares of a small active business that have been owned for at least 2 yrs, 90% of the value at time of gift or sale were used in an active business and over the last 2 yrs at least 50% of the value of the total assets were employed in an active business. These are the main points and YES you must elect to take this exemption like the unified tax credit it has to be elected ands filed its not like the marital exemption that is automatic.
JG
Transfers to spouse are tax-deferred:
http://www.cra-arc.gc.ca/E/pub/tp/it325r2/it325r2-e.pdf
Unless the taxpayer (the transferor) elects not to have the rollover
apply (see 5 below), the realization of accrued gains and losses,
including any terminal losses or the recapture of capital cost
allowance, is postponed until the recipient (the spouse, former spouse
or trust) disposes or is deemed to dispose of the property.
http://www.cra-arc.gc.ca/E/pub/tp/it325r2/it325r2-e.pdf
Unless the taxpayer (the transferor) elects not to have the rollover
apply (see 5 below), the realization of accrued gains and losses,
including any terminal losses or the recapture of capital cost
allowance, is postponed until the recipient (the spouse, former spouse
or trust) disposes or is deemed to dispose of the property.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
If you want to use the Cap gain election you have to elect out or else you do not get the step up to your spose in ACB, If he elects for gift tax at FMW and uses his unified tax credit he should elect at FMW to get the bump up to his spouse and claim his CGE. If does it the way you show at ACB she get no bump up.
JG