Do gifts made to spouses generally incur donor's tax?

Gifts made to spouses are generally exempt from donor's tax due to the marital deduction. This provision allows individuals to give any amount of money or property to their spouse without incurring donor's tax, as long as the recipient spouse is a U.S. citizen. The reasoning behind this exemption lies in the recognition that transfers between spouses are seen as a part of their shared financial relationship, thereby not constituting a taxable event.

The marital deduction serves to support the financial unity of a married couple and encourages interspousal transfers, allowing them to manage their finances collectively. This is especially significant in estate planning, where assets may be passed between spouses without immediate tax implications, thus facilitating smoother transitions of wealth within families.

Options indicating that gifts to spouses are fully taxable or only subject to tax in the case of divorce do not consider the tax benefits provided by the marital deduction. Similarly, suggesting that only gifts over a particular amount are taxable overlooks the fundamental principle that all interspousal transfers in a marriage are typically exempt from donor's tax regulations.