§2502 — Rate of tax
20 citing cases
Statute Text — 26 U.S.C. §2502
The tax imposed by section 2501 for each calendar year shall be an amount equal to the excess of—
a tentative tax, computed under section 2001(c), on the aggregate sum of the taxable gifts for such calendar year and for each of the preceding calendar periods, over
a tentative tax, computed under such section, on the aggregate sum of the taxable gifts for each of the preceding calendar periods.
Whenever used in this title in connection with the gift tax imposed by this chapter, the term “preceding calendar period” means—
calendar years 1932 and 1970 and all calendar years intervening between calendar year 1932 and calendar year 1970,
the first calendar quarter of calendar year 1971 and all calendar quarters intervening between such calendar quarter and the first calendar quarter of calendar year 1982, and
all calendar years after 1981 and before the calendar year for which the tax is being computed.
For purposes of paragraph (1), the term “calendar year 1932” includes only that portion of such year after
June 6, 1932
.
The tax imposed by section 2501 shall be paid by the donor.
Treasury Regulations
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Treas. Reg. §25.2502-1Rate of tax
(a) Computation of tax. The rate of tax is determined by the total of all gifts made by the donor during the calendar period and all the preceding calendar periods since June 6, 1932. See § 25.2502-1(c)(1) for the definition of “calendar period” and § 25.2502-1(c)(2) for the definition of “preceding calendar periods.” The following six steps are to be followed in computing the tax:
(1) First step. Ascertain the amount of the “taxable gifts” (as defined in § 25.2503-1) for the calendar period for which the return is being prepared.
(2) Second step. Ascertain “the aggregate sum of the taxable gifts for each of the preceding calendar periods” (as defined in § 25.2504-1), considering only those gifts made after June 6, 1932.
(3) Third step. Ascertain the total amount of the taxable gifts, which is the sum of the amounts determined in the first and second steps. See § 25.2702-6 for an adjustment to the total amount of an individual's taxable gifts where the individual's current taxable gifts include the transfer of certain interests in trust that were previously valued under the provisions of section 2702.
(4) Fourth step. Compute the tentative tax on the total amount of taxable gifts (as determined in the third step) using the rate schedule in effect at the time the gift (for which the return is being filed) is made.
(5) Fifth step. Compute the tentative tax on the aggregate sum of the taxable gifts for each of the preceding calendar periods (as determined in the second step), using the same rate schedule set forth in the fourth step of this paragraph (a).
(6) Sixth step. Subtract the amount determined in the fifth step from the amount determined in the fourth step. The amount remaining is the gift tax for the calendar period for which the return is being prepared.
(b) Rate of tax. The tax is computed in accordance with the rate schedule in effect at the time the gift was made as set forth in section 2001(c) or corresponding provisions of prior law.
(c) Definitions. (1) The term “calendar period” means:
(i) Each calendar year for the calendar years 1932 (but only that portion of such year after June 6, 1932) through 1970;
(ii) Each calendar quarter for the first calendar quarter of the calendar year 1971 through the last calendar quarter of calendar year 1981; or
(iii) Each calendar year for the calendar year 1982 and each succeeding calendar year.
(2) The term “preceding calendar periods” means all calendar periods ending prior to the calendar period for which the tax is being computed.
(d) Examples. The following examples illustrate the application of this section with respect to gifts made by citizens or residents of the United States:
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Treas. Reg. §25.2502-1(a)Computation of tax.
Computation of tax. The rate of tax is determined by the total of all gifts made by the donor during the calendar period and all the preceding calendar periods since June 6, 1932. See § 25.2502-1(c)(1) for the definition of “calendar period” and § 25.2502-1(c)(2) for the definition of “preceding calendar periods.” The following six steps are to be followed in computing the tax:
(1) First step. Ascertain the amount of the “taxable gifts” (as defined in § 25.2503-1) for the calendar period for which the return is being prepared.
(2) Second step. Ascertain “the aggregate sum of the taxable gifts for each of the preceding calendar periods” (as defined in § 25.2504-1), considering only those gifts made after June 6, 1932.
(3) Third step. Ascertain the total amount of the taxable gifts, which is the sum of the amounts determined in the first and second steps. See § 25.2702-6 for an adjustment to the total amount of an individual's taxable gifts where the individual's current taxable gifts include the transfer of certain interests in trust that were previously valued under the provisions of section 2702.
(4) Fourth step. Compute the tentative tax on the total amount of taxable gifts (as determined in the third step) using the rate schedule in effect at the time the gift (for which the return is being filed) is made.
(5) Fifth step. Compute the tentative tax on the aggregate sum of the taxable gifts for each of the preceding calendar periods (as determined in the second step), using the same rate schedule set forth in the fourth step of this paragraph (a).
(6) Sixth step. Subtract the amount determined in the fifth step from the amount determined in the fourth step. The amount remaining is the gift tax for the calendar period for which the return is being prepared.
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Treas. Reg. §25.2502-1(b)Rate of tax.
Rate of tax. The tax is computed in accordance with the rate schedule in effect at the time the gift was made as set forth in section 2001(c) or corresponding provisions of prior law.
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Treas. Reg. §25.2502-1(c)Definitions.
Definitions. (1) The term “calendar period” means:
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Treas. Reg. §25.2502-1(d)Examples.
Examples. The following examples illustrate the application of this section with respect to gifts made by citizens or residents of the United States:
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Treas. Reg. §25.2502-1(i)§25.2502-1(i)
Each calendar year for the calendar years 1932 (but only that portion of such year after June 6, 1932) through 1970;
(ii) Each calendar quarter for the first calendar quarter of the calendar year 1971 through the last calendar quarter of calendar year 1981; or
(iii) Each calendar year for the calendar year 1982 and each succeeding calendar year.
(2) The term “preceding calendar periods” means all calendar periods ending prior to the calendar period for which the tax is being computed.
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Treas. Reg. §25.2502-2Donor primarily liable for tax
Section 2502(d) provides that the donor shall pay the tax. If the donor dies before the tax is paid the amount of the tax is a debt due the United States from the decedent's estate and his executor or administrator is responsible for its payment out of the estate. (See § 25.6151-1 for the time and place for paying the tax.) If there is no duly qualified executor or administrator, the heirs, legatees, devisees, and distributees are liable for and required to pay the tax to the extent of the value of their inheritances, bequests, devises, or distributive shares of the donor's estate. If a husband and wife effectively signify consent, under section 2513, to have gifts made to a third party during any “calendar period” (as defined in § 25.2502-1(c)(1)) considered as made one-half by each, the liability with respect to the gift tax of each spouse for that calendar period is joint and several (see § 25.2513-4). As to the personal liability of the donee, see paragraph (b) of § 301.6324-1 of this chapter (Regulations on Procedure and Administration). As to the personal liability of the executor or administrator, see section 3467 of the Revised Statutes (31 U.S.C. 192), which reads as follows:
Every executor, administrator, or assignee, or other person, who pays, in whole or in part, any debt due by the person or estate for whom or for which he acts before he satisfies and pays the debts due to the United States from such person or estate, shall become answerable in his own person and estate to the extent of such payments for the debts so due to the United States, or for so much thereof as may remain due and unpaid.
As used in such section 3467, the word “debt” includes a beneficiary's distributive share of an estate. Thus if an executor pays a debt due by the estate which is being administered by him or distributes any portion of the estate before there is paid all of the gift tax which he has a duty to pay, the executor is personally liable, to the extent of the payment or distribution, for so much of the gift tax as remains due and unpaid.
20 Citing Cases
As relevant here, it provides: “A tax, computed as provided in section 2502, is hereby imposed for each calendar year on the transfer of property by gift during such calendar year by any individual .
ofthe gift tax liability on a net gift rests on the premise that gift tax is ultimately paid by the donor, using the donee as a conduit. See Estate ofSachs v. Commissioner, 88 3Petitioner apparently means to refer to subsec. (c), rather than (d), ofsec. 2502. Sec. 2502(c) provides: "The [gift] tax imposed by section 2501 shall be paid by the donor." - 15 - T.C. 769, 778 (1987), affd in part and rev'd in part, 856 F.2d 1158 (8th Cir. 1988); Estate ofSommers v. Commissioner, at *50 n.25. Petition
Section 2502 explains the cumulative aspects of gift tax, whereby the tax rate for a gift is set by looking at that year's gifts in relation to the donor's lifetime giving . Gifts of $10,000 per- 16 In the midst of this back-and-forth is an argument about who should bear the burden of proof under section 7491 . The issues in this case, however, are