The bazillion dollar engagement ring given to Mariah Carey got me to wondering if there would be tax on the gift. One argument is that they are not married so there is no spousal exclusion and the gift is taxable. Another is that the gift is contingent upon marriage, so title to the ring does not pass until after they are married and the spousal exclusion is in effect.
It depends. In some states an engagement ring is considered contingent, and if the marriage doesn't take place it must be given back. In other states the gift is considered complete, and need not be returned if there is no marriage.
So as you say, if it's contingent the gift isn't complete until the marriage ceremony takes place. And at that time the couple is married so no return is required. But if the gift is complete at the time the ring is given, then (assuming it's worth more than the exemption amount) a gift tax return should be filed.
So what happens if the gift is complete at the time it is given and then the marriage occurs in the same tax year.
If you get married by 12/31 in the year of the gift, do you get to use the unlimited spousal deduction for all gifts that year, including ones before the actual date of the marriage?
As far as the IRS is concerned, if you're married on Dec 31, you were married the whole year. Guess what my wedding anniversary is.
As far as the IRS is concerned, if you're married on Dec 31, you were married the whole year. Guess what my wedding anniversary is. ============ CAREFUL: Agreed that is the general rule for filing status, but what if they got married in December, went on the honeymoon returning January -- such that they never cohabitated during [the last 6 months of] the year? If [at least] one of them has a dependent child from a former marriage, that spouse [or both] could qualify for HoH filing status instead. 26 U.S.C.
7703 makes that clear for ALL purposes (including gift tax), not just filing status. Therefore, one needs to make certain that the donor is still considered married even if the recipient is not under this rule. 26 U.S.C. 7701(a)(17) does specifically state that for gift tax purposes regarding division of property (section 2516), "husband" and "wife" relationships remain in place AFTER a divorce, but says nothing about the period before in the year of marriage.
I d "(b) Certain married individuals living apart For purposes of those provisions of this title which refer to this subsection, if? ..."
The only section in Title 26 that I am aware of that points to 7703(b) is code section 2(b) Definition of Head of Household. Therefore, I must conclude that any other provision of the code not pointing to 7703(b) uses the regular definition of who is married unless some other provision has a different meaning.
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