Gifting assets to loved ones is one of the simplest ways of reducing your taxable estate. However, what may not be as simple is determining whether you need to file a federal gift tax return (Form 709) for the year in which those gifts are made. With the April 17 filing deadline approaching, now is the time to find out an answer.
When a Gift Tax Return is Required:
A Form 709 is required if you:
When a Gift Tax Return is not Required:
No Form 709 is required if you:
If you transferred hard-to-value property, such as artwork or interests in a family-owned business, consider filing a gift tax return even if you’re not required to do so. Adequate disclosure of the transfers reported on a gift tax return triggers the running of the statute of limitations, generally preventing the IRS from challenging your valuations more than three years after you file.
In some cases it’s even advisable to file a gift tax return to report nongifts - such as the sale of assets to a family member or a trust. Again, filing a gift tax return triggers the running of the statute of limitations and prevents the IRS from claiming, more than three years after you file the return, that the assets were undervalued and, therefore, partially taxable.
Contact us if you made gifts last year and are unsure if you should file a gift tax return. I can be reached at SDitman@BerdonLLP.com or contact to your Berdon advisor.
Scott T. Ditman, a tax partner and Chair, Personal Wealth Services at Berdon LLP, advises high net worth individuals and family/owner-managed business clients on building, preserving, and transferring wealth, estate and income tax issues, and succession and financial planning.