What year does gift count toward annual exclusion?

For a cash-basis taxpayer who uses a calendar tax year, in what year does a gift count toward the annual estate exclusion: (a) the year in which the check is mailed or delivered; or (b) the year in which the check is cashed (i.e. clears the bank and appears on the bank statement)?

Generally, the mail-box rule does not apply for federal gift tax purposes. Instead, a gift by check is generally complete when the check is accepted for payment, although the Tax Court and certain circuit courts have held that completion by acceptance for payment related back to the date of presentment for payment (i.e., deposit with recipient's bank) under a variant of the relation-back doctrine. A gift is complete for federal gift tax purposes when the donor has "so parted with dominion and control" over the property gifted "so as to leave i`n him no power to change its disposition, whether for his own benefit or for the benefit of another...." Treas. Reg. 25.2511-2(a). Generally, with respect to a gift by check, the relevant state law controls, and the donor has not parted with dominion and control so long as the donor can still stop payment on the check. See, e.g., Rosano v. U.S., 245 F.3d

212 (2d Cir. 2001). Generally, under the law of most states, a gift by check is not complete until the check has been presented for payment and the bank on which it is drawn has accepted it for payment. Id. However, in the context of gifts made inter vivos where the checks are ultimately cashed while the donor is still living, the Tax Court and some of the circuits have applied a variant of the relation-back doctrine to conclude that, in the absence of any significant delay between presentation and payment, and provided the account on which the checks were drawn contained sufficient funds to honor the checks at the time of presentment, the completion of the gift apon payment of the check relates back to the date of presentment, and that the gift was therefore complete on the date on which the check was presented for payment (i.e., typically, deposited with the recipient's bank). See, e.g., Metzger v. CIR, 38 F.3d 118 (4th Cir 1994). See also Estate of Newman v. CIR, 111 T.C. 81 (1998)(explicitly indicating that continued existence of donor in Metzger was a necessary predicate to application of the relation-back doctrine, and refusing to expand that doctrine to gifts made by check where donor was not alive when the checks were ultimately paid). Thus, the rule appears to be, depending on the circuit to which your case is appealable, that gifts by check, other than gifts to charity, will be complete for federal gift tax purposes when the check is accepted for payment by the drawee bank. However, depending on the circuit to which your case would be appealable, if the donor is still alive when the checks are ultimately paid by the bank on which drawn, then the gift will be regarded as completed on the date the checks were presented for payment, unless the account on which they were drawn did not have sufficient funds to fully honor the checks as of the date of presentment. Hopefully the foregoing gives you some further leads on authority and precedent you might find; without more detailed facts, though, I cannot give any specific advise on what the most likely outcome is in your case.

Yes. Thanks so much for the legal research. I will follow up on the citations.