DRS: IP 94(1), A Guide to the Federal and Connecticut Gift Taxes

 

STATE OF CONNECTICUT
DEPARTMENT OF REVENUE SERVICES

450 Columbus Blvd
Hartford CT 06103
 
 
 
 
 
 

 
 

This Informational Publication has been replaced by IP 94(1.1)

IP 94(1)

A Guide to the Federal and Connecticut Gift Taxes


INTRODUCTION: Many people are not aware that the transfer of property by gift, including the transfer of real estate, may be subject to the Federal and the Connecticut gift taxes. This informational publication is intended to alert you to the fact that certain transfers of property are considered gifts. If you give a gift, you may be required to file a Federal gift tax return and a Connecticut gift tax return. Understanding the gift tax is important because if you are required to file a return and you do not do so, you may be charged various penalties.

Although this publication will only provide general information, it will refer you to additional state and federal publications that will assist you in complying with Federal and Connecticut gift tax requirements.


Q. WHAT IS THE GIFT TAX?

A. The gift tax is a tax imposed on the transfer by gift of real or personal property.


Q. WHAT TRANSFERS OF PROPERTY BY GIFT MAY BE SUBJECT TO GIFT TAX?

A. In general, all transfers by gift of real or personal property, whether tangible (such as a car, boat or jewelry) or intangible (such as cash) that are made by you (the donor) to someone else (the donee) are subject to the gift tax.


Q. WHEN IS A TRANSFER OF PROPERTY CONSIDERED A GIFT?

A. In general, a transfer of property is a gift if the fair market value of the property exceeds the amount received (in money or other type of payment) for the property. Thus, if you give property to another person or entity or if you sell it (other than in the regular course of business) for less than it is worth, you may be making a gift.


Q. WHAT ARE SOME EXAMPLES OF GIFTS OF REAL PROPERTY?

A. Whenever you transfer title to real estate and you receive less than the fair market value of the property (in cash or other type of payment) and the transfer is not the result of a sale in the regular course of business, you may be making a taxable gift.

EXAMPLE 1: John owns a vacant lot. He conveys title to the property to his son. John does not receive any money or other type of payment from his son. John has made a gift to his son equal to the fair market value of that lot.

EXAMPLE 2: Lois owns a house worth $125,000. She sells the house to a close friend for $25,000, a fraction of its value. She has made a gift to her friend of $100,000, the difference between the fair market value of the house and the selling price. [Fair Market Value $125,000 - Sales Price $25,000 = Gift $100,000]


Q. WHO IS REQUIRED TO FILE A FEDERAL GIFT TAX RETURN?

A. If the value of your gift is in excess of $10,000, you must file a Federal gift tax return, whether or not the gift results in a federal tax. The gift is to be reported on Federal Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return. However, you do not have to file a gift tax return for:

a. A transfer of a present interest that is not more than the annual exclusion ($10,000);

b. A qualified transfer for educational or medical expenses; or

c. A transfer to your spouse that qualifies for the unlimited marital deduction.

NOTE: The above exceptions are fully explained in the IRS publications. See "Related Forms and Publications" below.


Q. WHO MUST FILE A CONNECTICUT GIFT TAX RETURN?

A. If you were required to file a Federal gift tax return, you may also be required to file a Connecticut gift tax return. Whether or not you must file depends upon whether you are a resident or a nonresident of Connecticut.

A Connecticut resident who made a gift of real or personal property during the calendar year and who is required to file a Federal gift tax return, must file a Connecticut gift tax return (Form CT-709) if:

a. The gift is of any intangible property (such as cash);

or

b. The gift is of real or personal property located in Connecticut.

A nonresident who made a gift of real or personal property and who is required to file a federal gift tax return, must file a Connecticut gift tax return (Form CT-709) if:

a. The gift is of intangible property within Connecticut used in carrying on a trade or business within Connecticut;

or

b. The gift is of real or personal property located in Connecticut.


Q. WHO MUST PAY THE TAX?

A. The person making the gift is responsible to file the Federal and Connecticut gift tax returns and pay the taxes due (if any). If the gift taxes are not paid when due, the person receiving the gift may have to pay the tax.


Q. WHEN SHOULD THE RETURNS BE FILED?

A. The Federal and Connecticut gift tax returns must be filed, and the gift taxes paid, on or before April 15th annually for gifts made during the preceding calendar year.


Q. WHAT HAPPENS IF A RETURN IS NOT FILED?

A. If you fail to file a return and pay the tax when due, you will be required to pay interest on the tax deficiency from the due date of the return and to pay any applicable penalties.


EFFECT OF THIS DOCUMENT: An informational publication is a document that addresses issues frequently raised by taxpayers. It is less technical in nature than a Policy Statement but may be referred to by individuals for guidance.


RELATED FORMS AND PUBLICATIONS: You may request the following publications about the Federal and the Connecticut gift taxes:

Call the Internal Revenue Service at 1-800-829-3676 to order:

Publication 448, Federal Estate and Gift Taxes

Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return

Call the Connecticut Department of Revenue Services at 1-800-382-9463 to order:

Form CT-709, Connecticut Gift Tax Form and Instructions


FOR FURTHER INFORMATION: If you have questions about Connecticut taxes, please call the Department of Revenue Services during business hours, Monday through Friday:

  • 860-297-5962 (Hartford calling area or from out-of-state); or
  • 1-800-382-9463 (toll-free from within Connecticut)

Telecommunications Device for the Deaf (TDD/TT) users only call 860-297-4911 during business hours.


FORMS AND PUBLICATIONS:

You may obtain forms and publications at any hour, seven days a week:

  • Telephone: use the phone numbers listed above and select Option 3 from a touch-tone phone;
  • Internet: preview and download forms from the DRS web site: http://www.ct.gov/drs


IP 94(1)
Gift tax
Issued: 1/6/94