Bitcoin Gift Split

Gift Splitting and Spousal Consent Documentation

This memo is published by CustodyStress, an independent Bitcoin custody stress test that produces reference documents for individuals, families, and professionals.

Transfer Completion and Election Timing

Married couples can elect to split gifts for tax purposes. One spouse gives property to a child. Both spouses consent to treat the gift as made one-half by each. This doubles the annual exclusion available and allows using both spouses' lifetime exemption amounts. The election requires both spouses to consent on their gift tax returns.

Bitcoin gift split elections encounter timing gaps when tax reporting requires documenting transfers that occurred versus when technical bitcoin transfers actually complete. Gift splitting assumes the donor spouse controlled and transferred the gifted property. Self-custody bitcoin creates questions about when transfer occurred for tax purposes and which spouse had control when the blockchain transaction was broadcast.

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Transfer Completion and Election Timing

Gift tax rules require the gift to be complete before year end to report it that year. A husband plans to give bitcoin to a child in December. He initiates the transaction on December 30th. Network congestion delays confirmation. The transaction confirms on January 2nd. For tax purposes, when did the gift occur? If it occurred in January, it cannot be split on the prior year return. If it occurred in December, the timing of when control passed becomes disputed.

Some preparers treat broadcast as the gift date. The transaction was broadcast in December even though confirmation occurred in January. This matches the donor's intent timing. The IRS might view confirmation as the completion date. Until confirmed, the transaction could theoretically be replaced through fee manipulation. Whether broadcast or confirmation determines completion affects which tax year the bitcoin gift split election appears on.

Multiple gifts across year boundaries create cumulative documentation challenges. A couple makes bitcoin gifts to three children in December. One transaction confirms in December. Two confirm in January. The couple's gift tax return must allocate which gifts occurred when. Bitcoin gift split elections work differently for each child depending on confirmation timing that was unpredictable when gifts were initiated.

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Spousal Consent Documentation Gaps

Gift splitting requires both spouses to consent. Consent occurs when filing gift tax returns. The couple files returns in April reporting December gifts. Both sign consenting to split. One spouse did not understand what bitcoin is or how the transfer worked. They consented to split a gift they did not comprehend technically. Whether informed consent existed when the consenting spouse cannot explain what was transferred is uncertain.

Some couples have one financially dominant spouse. That spouse manages all bitcoin. The other spouse signs tax returns without independent knowledge. Years later, the IRS questions the reported gift value or timing. The non-managing spouse cannot explain the transaction details. They relied entirely on the managing spouse's representations. Whether this reliance satisfies consent requirements when the gift involved technical transfer the consenting spouse never observed becomes disputed.

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Valuation and Split Amount Determination

Gift splitting requires determining the gift value. Bitcoin volatility creates valuation questions. A bitcoin transfer is broadcast on December 30th at 4pm when bitcoin trades at $50,000. It confirms on January 2nd when bitcoin trades at $48,000. The couple's return reports a $50,000 gift. The IRS might claim the gift value should reflect the confirmation date price. This affects the split amount each spouse is deemed to have given.

Intraday volatility compounds valuation uncertainty. A gift transaction is broadcast and confirms on the same day. Bitcoin price fluctuated between $49,000 and $51,000 that day. Which price applies? The couple uses the price at broadcast time. The IRS later argues they should have used the price at confirmation time or an average price. Different valuation approaches create different split amounts for reporting purposes.

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Control Attribution When Custody Is Joint

Gift splitting assumes one spouse made the gift. That spouse had control and transferred it. Some couples use joint custody arrangements. Bitcoin is in a multisignature wallet requiring both spouses to sign. A gift to a child requires both spouses' signatures. Which spouse made the gift when both had to participate? The election treats one as the donor consenting spouse and one as the non-donor consenting spouse. This classification may not match the actual control dynamics.

Joint custody creates reporting ambiguity. The couple files their return treating the husband as donor. They could have filed treating the wife as donor. Nothing in the custody arrangement determines which characterization is correct. The choice is arbitrary from a technical custody perspective but affects tax reporting. Different preparers might report the same gift differently.

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Multiple Gifts and Split Consistency

Couples making multiple gifts in one year must be consistent. If they elect to split gifts, the election applies to all gifts either spouse makes that year. A couple makes bitcoin gifts to children. They also make cash gifts to charity. Electing to split the bitcoin gifts means they must split the charitable gifts too. This creates reporting complexity when the couple did not contemplate that bitcoin gift split decisions would affect unrelated transfers.

Consistency requirements create all-or-nothing pressure. The couple wants to split the bitcoin gift to maximize annual exclusion usage. Splitting creates unwanted reporting for other gifts. They must choose between optimal bitcoin gift split treatment and simpler overall reporting. The technical transfer characteristics of one asset affect tax elections for unrelated transfers.

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Amended Return Complications

Gift tax returns are filed after the year ends. A couple files their return in April reporting no gifts. In June, they realize a December bitcoin transfer was a completed gift that should have been reported. They file an amended return. Can they elect to split on an amended return? The code allows this if both spouses consent before the due date. But the due date has passed. Whether late split elections are permitted on amended returns is interpretively uncertain.

Some amendments involve correcting reported values. The original return reported a bitcoin gift at $50,000. Later review reveals the valuation was incorrect. An amended return corrects this to $55,000. The split election was made based on the original value. Does the corrected value automatically apply to the split or must new consent be documented? The amendment process for bitcoin gift split corrections is unclear when the underlying transaction was already reported.

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Non-Resident Spouse Complications

Gift splitting is available only if both spouses are U.S. citizens or residents. A couple includes one U.S. citizen and one non-resident alien spouse. They cannot split gifts. The U.S. citizen spouse makes a bitcoin gift to a child. This uses only that spouse's annual exclusion. Later, the non-resident spouse becomes a resident. Can they amend prior returns to elect splitting retroactively? The timing of residency change affects whether bitcoin gift split elections become available for already-completed transfers.

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Community Property State Implications

In community property states, spouses own community assets equally. Bitcoin acquired during marriage using community funds is community property. When one spouse gifts community property bitcoin, both spouses are deemed to have made the gift automatically. Gift splitting becomes redundant. However, characterizing bitcoin as community versus separate property depends on tracing acquisition. If the tracing is uncertain, whether the gift was already automatically split or requires an election becomes unclear.

Some couples mix separate and community bitcoin. Separate property bitcoin is moved into multisignature wallets with community property bitcoin. The wallets commingle. A gift from these wallets has unclear source. Whether the gift came from separate or community property affects whether split election is needed or automatic. The blockchain record shows only the transfer, not property law characterization.

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Divorce During Gift Year

Gift splitting requires being married for the entire calendar year. A couple makes bitcoin gifts to children in March. They divorce in November. The code disallows gift splitting for gifts made during a year the couple divorced. The March bitcoin gifts cannot be split even though both spouses were married when the gifts occurred. This timing rule interacts with bitcoin transfer timing questions creating scenarios where gift completion timing determines whether split was ever possible.

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Prior Year Elections and Ongoing Coordination

Couples who elected splitting in one year establish a pattern. Tax preparers assume continued splitting in subsequent years. A couple elected bitcoin gift split in 2023. In 2024, they make more bitcoin gifts. The preparer automatically includes splitting on the 2024 return. One spouse did not intend to consent for 2024. They signed the return without carefully reviewing the gift schedule. Whether the signature constitutes valid consent when intention was absent becomes relevant if the election is later challenged.

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Recordkeeping Across Returns

Gift tax returns require reporting cumulative lifetime gifts. Prior year bitcoin gift split elections affect current year reporting. The couple must track which prior gifts were split and which were not. Bitcoin transfer records do not inherently show tax treatment. The couple must maintain parallel records mapping blockchain transactions to tax elections. If these records are lost or incomplete, reconstructing prior year bitcoin gift split treatment becomes difficult when preparing current returns.

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IRS Examination and Evidence Production

The IRS examines gift tax returns and questions reported split elections. Examiners request evidence showing both spouses consented. For traditional gifts, cancelled checks or wire transfer records show transfers from joint accounts providing circumstantial consent evidence. Bitcoin transfers show only blockchain transactions. Whether one or both spouses participated in executing the transfer is not evident from blockchain records. The couple must produce other evidence of consent that may not exist.

Some couples documented consent through email or written agreements. One spouse emails the other describing the planned gift and asking for consent to split. The reply email agrees. This creates a contemporaneous consent record. Other couples handled this verbally with no documentation. Years later during examination, verbal consent must be proven through testimony rather than documents. The evidentiary value differs significantly.

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Foreign Donee Reporting Interactions

Gifts to foreign persons above certain thresholds require additional reporting. A couple makes a bitcoin gift to a child living abroad. They elect to split the gift. This creates two separate gifts for reporting purposes. Each gift is below the foreign gift reporting threshold individually. Combined, they exceed it. Whether foreign gift reporting requirements apply when the actual transfer was singular but tax treatment split it into two gifts creates interpretive questions about form substance.

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Generation-Skipping Transfer Tax Coordination

Gifts to grandchildren may trigger generation-skipping transfer tax. GST exemption allocation interacts with gift splitting. A grandparent makes a bitcoin gift to a grandchild. The couple elects to split. GST exemption can be allocated by either or both spouses. The allocation decision happens on the gift tax return filed months after the blockchain transfer. Technical transfer completion and tax exemption allocation timing are disconnected creating planning complexity when bitcoin gift split elections interact with GST considerations.

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Assessment

Bitcoin gift split elections combine gift tax consent requirements with technical transfer timing uncertainties. Transfer completion depends on whether broadcast or confirmation determines when control passed. Spousal consent documentation may not reflect actual technical understanding of what was transferred. Valuation depends on which moment's price applies when broadcast and confirmation occur at different values or on different days. Joint custody arrangements create control attribution questions when both spouses must participate technically.

Multiple gift consistency requirements force elections for unrelated transfers. Amended returns encounter late election timing limitations. Non-resident spouse status changes affect retroactive election availability. Community property characterization interacts with blockchain tracing difficulties. Divorce during the gift year can retroactively invalidate splitting for gifts made while married. Prior year election patterns may create assumed consent that was not actually present.

Recordkeeping requires maintaining parallel tax treatment documentation separate from blockchain records. IRS examination evidence demands may not be satisfiable through blockchain data alone. Foreign donee reporting thresholds interact with split treatment. Generation-skipping transfer tax allocation timing disconnects from technical transfer completion. Understanding these gaps explains how bitcoin gift split elections can be technically complete while leaving tax documentation and consent evidentiary requirements uncertain.

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System Context

Examining Bitcoin Custody Under Stress

Bitcoin Custody Walkthrough With Spouse

Verify Family Can Access Bitcoin

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