GIFT TAX RETURNS

SUMMARY DATA

For the year 1948, individual donors filed 26,200 gift tax returns, reporting the transfer of property by gift during the calendar year 1948. The total amount of property transferred is $740,923,000. There are 6,559 taxable returns showing total gifts of $377,889,000 before exclusions amounting to $42,013,000 and net gifts of $209,148,000, resulting in a gift tax liability of $45,338,000. The 19,641 nontaxable returns show total gifts amounting to $363,034,000 before exclusions of $88,484,000; and the total deductions for charitable gifts, marital deduction, and specific exemption equal the amount of gift after exclusions.

As compared with gift tax data for the previous year, there is an increase of 1,343 returns, or 5.4 percent; but there are decreases of $36,690,000, or 4.7 percent, in the total gifts before exclusions, of $47,386,000, or 18.5 percent, in net gifts, and of $19,064,000, or 29.6 percent, in gift tax liability. The effective tax rate for 1948 is 21.7 percent; for 1947 it was 25.1 percent.

Under the provision of the 1948 act which stipulates that gifts made after April 2, 1948, by married persons to third parties may be considered as made one-half by each spouse, gifts in the amount of $95,213,000 are transferred from the return of the original donor to the return of the donor's spouse who then reports such gifts on his (or her) separate return. Gifts amounting to $63,538,000 are transferred to donees who at the time of the gift were the donor's spouse; and marital deduction of $31,275,000 is taken in respect thereto for the computation of net gifts as provided under the 1948 act.

The principal types of property transferred by gift during 1948 are stocks and bonds, cash, and real estate. As is generally the case, the value of stocks and bonds exceeds that of any other type. Stocks and bonds comprise 53.9 percent of the total gifts, cash 18.7 percent, real estate 15.0 percent, insurance 1.2 percent, and miscellaneous property 11.2 percent. Miscellaneous property includes such items as jewelry, objects of art, copyrights, forgiveness of debts, interest in an unincorporated business, assignment of judgments, leaseholds, land contracts, notes, and life interest or remainderman interest in property.

Gifts transferred in trust amount to $158,868,000, which is 21.4 percent of the total gifts for 1948. Stocks and bonds comprise twothirds of the gifts transferred in trust.

Gifts amounting to $142,218,000 were made to 3,240 charitable, public, and similar organizations during 1948; this is 19.2 percent of the total gifts. Charitable gifts increased about 3 million dollars over charitable gifts of the previous year. Charitable gifts are wholly deductible in the computation of gift tax (except in certain instances, if made by a nonresident alien), inasmuch as an exclusion is granted of the first $3,000 given to each donee and the remainder is allowed as a deduction in computing net gifts to be taxed.

GIFT TAX RETURNS INCLUDED

Gift tax returns used for the tables in this report are returns, Form 709, filed in 1949, for gifts made during the calendar year 1948, excluding returns which are not required to be filed. Data are completely tabulated from each return, prior to any revision that may be made as a result of audit by the Internal Revenue Service. The gift tax liability reported by the taxpayer and tabulated herein does not agree with the gift tax collections for the calendar year for 1949 as reported by the Treasury Department, because a tax deficiency may result from audit or payment of the tax liability reported may be deferred. Moreover, the collections include interest. penalties, and delinquent payments of tax, none of which are included in the tax reported.

GIFT TAX LAW

The Federal gift tax on the transfer of property by gift is imposed by chapter 4 of the Internal Revenue Code. The gift tax is not imposed upon property but subjects to tax the transfers of property by gift and extends to the sales and exchanges of property for less than an adequate and full consideration in money or money's worth. The tax is imposed whether the transfer is in trust or otherwise, whether the gift is direct or indirect or of a future interest in property, and whether the property so transferred is real or personal, tangible or intangible. The gift tax, a primary and personal liability of the donor, is an excise upon his act of making the transfer, and is measured by the value of properties passing from the donor to the donee or donees during the calendar year, regardless of the fact that the identity of any donee may not be known or ascertainable.

A gift tax return, Form 709, is required of every citizen or resident of the United States who, during the calendar year 1948, transferred to any one donee gifts totaling more than $3,000 in value or made gifts of a future interest in property regardless of the value thereof. A nonresident alien is similarly required to file a gift tax return if the gift consists of property situated in the United States. A return is required even though because of authorized deductions a tax may not be due. The return is due on or before the 15th day of March following the close of the calendar year in which the gift is made, and cannot be filed prior to the close of the calendar year unless the return is for a deceased donor.

The entire value of gifts totaling more than $3,000 made to any one donee during the calendar year must be reported in the total gifts of the donor, even though the first $3,000 of such gifts are excluded for the purpose of computing the gift tax. All gifts of a future interest in property, however small, must be included in the total gifts for the year and no exclusion is allowed for such gifts in computing the gift tax. Gifts totaling less than $3,000 to any one donee, other than gifts of future interests, generally are not required to be reported; however, under the new provision allowing spouses to divide between them gifts made to third parties after April 2, 1948, the reporting of such gifts is required when made to a common donee, if after the division either spouse is considered to have made gifts. exceeding $3,000 in value.

Under the 1948 act, if husband and wife consent, all gifts made by them to third parties after April 2, 1948, are considered as made

The spouse making the gift must report on his (or her) return the full value of the gift, provision being made on the return form for the transfer of one-half the value of such gifts to the other spouse who then must report this half on his or her separate gift tax return.

Under this act, gifts of community property made after April 2, 1948. are no longer sole gifts of the husband as is the case under the 1942 act. Each spouse may now report his or her undivided onehalf interest in community-property gifts on a separate gift tax return, or, if they prefer, division of such gifts may be accomplished by consent of both spouses as is done in the case of noncommunityproperty gifts.

Exclusions and deductions from total gifts are allowed for purposes of computing net gifts and tax. Exclusions are allowed for the first $3,000 of gifts, except gifts of future interests, made to every donee including donees represented by gifts picked up from the return of the spouse on account of the consent to divide gifts made to third parties. Deductions from total gifts after exclusions are allowed for specific exemption, gifts to charity, and for gifts made to a spouse (the so-called marital deduction). Specific exemption of $30,000 is stipulated for residents and citizens, which at the option of the donor, may be taken in a single year or spread over a period of years until exhausted. Deduction on account of charitable gifts (except in certain instances, if made by a nonresident alien) is the value of such gifts less exclusion of the first $3,000 of gifts to each charitable donee. A new deduction, introduced by the 1948 act, allows citizens and residents a marital deduction equal to one-half the value of property interests, which qualify for the deduction, transferred after April 2, 1948, to a donee who at the time of the gift was the donor's spouse; however, the deduction cannot exceed the amount of such gifts included in total gifts after the exclusion pertaining thereto.

The gift tax liability is the excess of a tax computed on the aggregate net gifts transferred subsequent to June 6, 1932, over a tax computed on the aggregate net gifts exclusive of the current year net gifts. The gift tax rates are 24 percent of the first $5,000 of net gifts, increasing on a graduated scale to 57% percent on net gifts in excess of $10,000,000.

A synopsis of the various revenue acts showing requirements for filing, exclusions, specific exemption, and tax rates is presented on pages 453-456.

BASIC ITEMS

Total gifts mean the entire value of gifts transferred by the donor, even though the first $3,000 of gifts to each donee may be eliminated later as an exclusion. The amount of total gifts is the value of gifts reported by the donor before division of gifts between spouses who consent to divide gifts made by them to third parties, after April 2, 1948. Gifts to any one donee totaling $3,000 or less, other than gifts of future interest in property, ordinarily need not be reported; however, on returns of married persons who consent to divide between them gifts made to a common donee, these small gifts are more often required than in former years. In tabulating the amount of total gifts for 1948, all gifts of future interests, however small, are included; but gifts other than future interests totaling $3,000 or less to any one donee are excluded except when reported

parties after April 2, 1948, and when divided either spouse is considered to have made a gift exceeding $3,000.

Total gifts before exclusions are "Total gifts for the year" and are the same as total gifts in the case of single donors or of married donors who do not consent to divide between spouses gifts made to third parties. In the case of married donors who consent to consider such gifts as made one-half by each spouse, total gifts before exclusions are the amount of gifts after the adjustments for the transfers between them; that is, total gifts of the taxpayer reduced by the portion which his (or her) spouse reports on a separate return, after which the taxpayer's gifts are increased by the amount of gifts picked up from the return of his (or her) spouse.

Exclusions are allowed as a deduction from total gifts in determining the total included amount of gifts for the year. Donors are allowed an exclusion not exceeding $3,000 of gifts (except gifts of future interests) made to any one donee. Under provisions for dividing between spouses, gifts made to third parties, each spouse is entitled to an exclusion for gifts represented in total gifts before exclusions resulting from the adjustments for transfers between spouses; so that in such cases more exclusions are allowed than in former years. As a consequence of dividing gifts between spouses and the necessity of reporting some gifts of $3,000 or less, an exclusion may be less than $3,000; it does not exceed the value of gifts to the donee after adjustments for transfers between spouses.

Total gifts after exclusions mean the amount of gifts in excess of the allowable exclusions. This excess is the "Total included amount of gifts for the year," against which deductions are allowed in computing the amount of net gifts for the year.

Deduction for charitable, public, and similar gifts is allowed against total gifts after exclusions for the value of such gifts in excess of the exclusion taken for each charitable donee.

Marital deduction is allowed a citizen or resident donor under the 1948 act, in determining the amount of net gifts for the year. The amount of the deduction is equal to one-half the value of property interests which qualify for the deduction, transferred after April 2, 1948, to a donee who at the time of the transfer was the donor's spouse, but allowed only to the extent that such gifts are included in total gifts after exclusions.

Specific exemption of $30,000 is allowed each citizen or resident donor and may be taken in its entirety in a single year or spread over a period of years at the option of the donor. However, when the aggregate of $30,000 has been taken, no further exemption is allowable. The amount of specific exemption for 1948 is the amount claimed in the current year by donors who have not previously used all of their specific exemption.

Net gifts for the year are the excess of total gifts after exclusions over the sum of the deductions for charitable, public, and similar gifts and, in the case of citizens and residents, marital deduction and specific exemption claimed in the current year.

Gift tax is the excess of a tax computed at the current graduated rates on the aggregate net gifts transferred since June 6, 1932, over a tax computed at the same rates on the aggregate net gifts exclusive of current year net gifts. This method of computing gift tax results in the net gifts of the current year being taxed either at the same