Discussion:Whether to file a gift tax when not required
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Discussion Forum Index --> Tax Questions --> Whether to file a gift tax when not required
| 17 December 2007 | |
| I would appreciate your opinion regarding the filing of a gift tax return when the amounts (after 40% discounted) are under the exclusion amount. The parents wants to transfer interest in LLC (containing real estate)to the children. An appraisal reported was prepared and an opinion was received that a 40% can be discounted for transferring minority interest in a LLC.
Pros- Altho no gift tax due, the filing starts the statute of limitation and after 3 years, no further dispute on the discounted value of gift. Cons- By filing the gift tax with the 40% discount, does the filing open the risk of IRS's audit? Your comments appreciated. | |
| 17 December 2007 | |
| If no gift return is file the statute does not run. If the return is filed and the IRS wants to audit it, they won't get any tax even if they prevail, will they? Better to file the return. | |
TheTinCook (talk|edits) said: | 18 December 2007 |
| If you're gift splitting, you need to file. | |
| 18 December 2007 | |
| IRS audits extremely few 709s, and what they do audit would mostly be associated with filed estate tax returns or those filed by wealthy people. They like potential for an audit deficiency before they start an audit. Would there be one here? | |
| 18 December 2007 | |
| If the 40% discount is accepted, then no tax is due but if the IRS challenges the 40% and disallow portion of the discount, then there is tax due on 706. | |
| 18 December 2007 | |
| TxSrv -
When IRS audits forms 709 associated with filed estate tax returns, do you think they have a potential adjustment on all of the returns attached to the form 706, or would the 3 year statute of limitations prevent them from adjusting returns that were filed more than three years prior? Great discussion. | |
| 18 December 2007 | |
| In order to start the statute of limitations the adequate disclosure standards have to be met. Further, I believe that a 25% understatement extends the statute to six years. Either position could allow the Service to challenge on 706 audit. | |
| 18 December 2007 | |
| This is a very specialized IRS exam area and was not mine, and to no surprise, I have read that "E&G" staffing has recently been reduced. I would imagine that stat lims on filed 709s are largely irrelevant if no tax paid, due to the unified credit when and if a 706 is filed.
The orig post describes a situation either above/below the 709 filing requirement, and I'm confident IRS today still essentially has no selection program for smaller 709s as they are filed, just like they essentially never did. Isn't simply necessary, productivity issues aside. I prefer to just do things correctly as opposed to thinking about audit probabilities, but this one seems one worry bead too many. "Doing things correctly" does include calls 'em as one sees 'em and move on, especially where's there's little/no tax impact. | |
| 18 December 2007 | |
| I expect to see progressive change on this. Staff reduction seems to have been mostly attrition and replacements seem to be mostly young ladies just out of law school, inexperienced and woefully overworked. I went years with no audits whatsoever on 706's and now that they have started up again it has been exclusively telephone and mail. In the area of discounts and valuation of closely held assets aggression is the rule and while accountants may be frightened by proposed preparer penalties, attorneys are not. I would suggest closing your eyes and not seeing them at all. Call them as documentation provided states and the file/not to file decision will likely depend on client's willingness to provide that documentation. | |
