Cal. Code Regs. tit. 18 § 15204
The gift tax is computed on the basis of the aggregate net gifts made to a particular donee, not on the basis of the aggregate net gifts made to all donees. Thus in each case there will be as many separate computations of tax as there are donees.
For the method of computation of gift tax, see Revenue and Taxation Code Section 15204.
In view of the method of computation of the gift tax as set forth in Revenue and Taxation Code Section 15204, the tax for any calendar year is in effect computed only on net taxable gifts (i.e., the excess of all gifts over exemptions allowed) for that year, upon the application of rates determined by the aggregate of all net gifts, which include the specific exemption (see Section 15118), made to the donee both during such year and all prior calendar years since 10 p.m. of June 21, 1939. The same result is reached by computing the tax on all net taxable gifts for prior years. This is the method used on form GT-1, Donor's Gift Tax Return, and explained in the Instructions for Filing Your California Gift Tax Return. It may be noted that in computing the tax on the return and pursuant to the instructions the specific exemption is not deducted separately but is automatically allowed in the tax table set forth in the instructions.
It may also be noted that if no gifts were made to a donee during any preceding calendar year, the tax for the year during which gifts are first made to the donee is computed by applying the specific exemption against the first $25,000 tax rate bracket (see Revenue and Taxation Code Sections 15205 through 15208), of net gifts made to the donee, by taxing the remainder of net gifts in the first bracket at the first tax rate, by taxing the next $25,000 of net gifts at the second tax rate, by taxing the amount of net gifts in the third tax rate bracket at the third tax rate, and so on. See also Section 15426.1 and note application of specific exemptions where the exemption is in an amount in excess of $25,000.
NOTE: Reference: Section 15204, Revenue and Taxation Code.
Cal. Code Regs. Tit. 18, § 15204