[DCResident1806]

If both couple live in the U.S and green card holders, does the marital deduction apply to them, i.e. they can give unlimited gift to each other without triggering any tax implication? If not, is there any annual limitation, thanks?

[AtlantaTaxExpert]

Yes, the marital exemption as it applies to gift and estate taxes DOES apply to green card holders.

[DCResident1806]

Thank you, AtltaTaxExpert. A following up question, if one of the couple becomes a US citizen, and the other one remains a green card holder, my understanding is that the marital exemption does not apply anymore. There is an annual gift exemption in that case. Am I right? Thank you.

[AtlantaTaxExpert]

No, that is NOT correct.

In tax matters, green card holders are treated exactly like U.S. citizens.

[IntlTax]

ATE, you might want to take another look at this, specifically Code §2523(i) which is titled "Disallowance of Marital Deduction Where Spouse Not Citizen." Under Rev. Proc. 2013-35, the inflation adjusted gift tax exclusion to a non-citizen spouse for 2014 is $145,000.

[DCResident1806]

Hi IntlTax, thank you for providing the source. It seems that two green card holders falls into the non-citizen spouse case under Code §2523(I). So does the gift tax exclusion apply to my question or the marital exemption apply? Thanks.

[IntlTax]

The $145,000 gift tax exclusion applies and not the marital deduction.

[DCResident1806]

Thanks a million. Just want to make sure I understand it clearly, so any funds transferred from my bank account to my wife's bank account will be deemed as a gift ?

[IntlTax]

Thanks a million. Just want to make sure I understand it clearly, so any funds transferred from my bank account to my wife's bank account will be deemed as a gift ?

How the transfer from one bank account to another is characterized depends (at least partly) on your intent. If you intend to gift the money to you wife, then it likely would be a gift. On the other hand, if you intend to loan it to her and she signs a promissory note promising to pay the money back to you, then it likely would be a loan.

There are several other possible characterizations of the transfer. It is not "deemed" a gift merely because it goes from one account to the other.

[DCResident1806]

Thank you.

[AtlantaTaxExpert]

I acknowledge that IntlTax's answer IS correct, and endorse his follow-up advice.

[DCResident1806]

ATE, thank you so much for your endorsement and help.

[AtlantaTaxExpert]

The thanks should go to IntlTax, as he did the research to get you the correct answer.