[Code of Federal Regulations]
[Title 26, Volume 14]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR25.2504-1]

[Page 531]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 25_GIFT TAX; GIFTS MADE AFTER DECEMBER 31, 1954--Table of Contents
 
Sec.  25.2504-1  Taxable gifts for preceding calendar periods.

    (a) In order to determine the correct gift tax liability for any 
calendar period it is necessary to ascertain the correct amount, if any, 
of the aggregate sum of the taxable gifts for each of the ``preceding 
calendar periods'' (as defined in Sec.  25.2502-1(c)(2)). See paragraph 
(a) of Sec.  25.2502-1. The term ``aggregate sum of the taxable gifts 
for each of the preceding calendar periods'' means the correct aggregate 
of such gifts, not necessarily that returned for those calendar periods 
and in respect of which tax was paid. All transfers that constituted 
gifts in prior calendar periods under the laws, including the provisions 
of law relating to exclusions from gifts, in effect at the time the 
transfers were made are included in determining the amount of taxable 
gifts for preceding calendar periods. The deductions other than for the 
specific exemption (see paragraph (b) of this section) allowed by the 
laws in effect at the time the transfers were made also are taken into 
account in determining the aggregate sum of the taxable gifts for 
preceding calendar periods. (The allowable exclusion from a gift is 
$5,000 for years before 1939, $4,000 for the calendar years 1939 through 
1942, $3,000 for the calendar years 1943 through 1981, and $10,000 
thereafter.)
    (b) In determining the aggregate sum of the taxable gifts for the 
``preceding calendar periods'' (as defined in Sec.  25.2502-1(c)(2)), 
the total of the amounts allowed as deductions for the specific 
exemption, under section 2521 (as in effect prior to its repeal by the 
Tax Reform Act of 1976) and the corresponding provisions of prior laws, 
shall not exceed $30,000. Thus, if the only prior gifts by a donor were 
made in 1940 and 1941 (at which time the specific exemption allowable 
was $40,000), and if in the donor's returns for those years the donor 
claimed deductions totaling $40,000 for the specific exemption and 
reported taxable gifts totaling $110,000, then in determining the 
aggregate sum of the taxable gifts for the preceding calendar periods, 
the deductions for the specific exemption cannot exceed $30,000, and the 
donor's taxable gifts for such periods will be $120,000 (instead of the 
$110,000 reported on the donor's returns). (The allowable deduction for 
the specific exemption was $50,000 for calendar years before 1936, 
$40,000 for calendar years 1936 through 1942, and $30,000 for 1943 
through 1976.)
    (c) If the donor and the donor's spouse consented to have gifts made 
to third parties considered as made one-half by each spouse, pursuant to 
the provisions of section 2513 or section 1000(f) of the Internal 
Revenue Code of 1939 (which corresponds to section 2513), these 
provisions shall be taken into account in determining the aggregate sum 
of the taxable gifts for the preceding calendar periods (under paragraph 
(a) of this section).
    (d) If interpretations of the gift tax law in preceding calendar 
periods resulted in the erroneous inclusion of property for gift tax 
purposes that should have been excluded, or the erroneous exclusion of 
property that should have been included, adjustments must be made in 
order to arrive at the correct aggregate of taxable gifts for the 
preceding calendar periods (under paragraph (a) of this section). 
However, see section 1000 (e) and (g) of the 1939 Code relating to 
certain discretionary trusts and reciprocal trusts. However, see Sec.  
25.2504-2(b) regarding certain gifts made after August 5, 1997.

[T.D. 7238, 37 FR 28727, Dec. 29, 1972, as amended by T.D. 7910, 48 FR 
40373, Sept. 7, 1983; T.D. 8845, 64 FR 67770, Dec. 3, 1999]