Cal. Code Regs. tit. 18 § 15426.1
The specific exemption must be applied against the lowest tax rate bracket or brackets of net gifts made to a particular donee (see Revenue and Taxation Code Sections 15205 to 15207, inclusive), and consumes the first portion of such bracket or brackets up to the amount allowed. Thus, where the specific exemption is under $25,000 it is applied against the first tax rate bracket and the remainder of net gifts in that bracket is taxable at the first and lowest tax rate for that particular donee class(see Revenue and Taxation Code Sections 15110 to 15113 and 15205 to 15207, inclusive). Where the specific exemption is over $25,000, as in the case of the $60,000 exemption of a donee spouse (see Revenue and Taxation Code Section 15421, as amended by Chapter 942, Statutes 1975, in effect as to gifts made on or after January 1, 1976), the first $25,000 thereof is applied to the first and lowest tax rate bracket, the next $25,000 is applied to the second and next lower bracket and the remaining $10,000 of the exemption is applied to the third tax rate bracket, any excess of gifts being taxed in the rate of the third tax bracket until that bracket is consumed up to $100,000, and so on into the higher tax brackets. (See also Section 15204.)
NOTE: Reference: Section 15426, Revenue and Taxation Code.
Cal. Code Regs. Tit. 18, § 15426.1