The shoe is about to fall (if it hasn’t already fallen) on taxpayers who transfer real estate to family members for little or no consideration, and fail to file gift tax returns and pay the gift tax.
In court papers filed in California relating to a John Doe summons, the IRS revealed that many states, including New York, New Jersey, Connecticut, and Florida have voluntarily provided the IRS with information relating to real estate property transfers between family members (other than spouses) for little or no consideration.
The IRS is specifically investigating transfers between the periods of January 1, 2005 and December 31, 2010.
An initial sampling of data reveals that 60-90% of such transfers were not reported.
It is not too late for most taxpayers who transferred real property for little or no consideration in 2010 to file a gift tax return. Taxpayers who transferred property for little or no consideration prior to 2010 and failed to file gift tax returns should speak with tax counsel on becoming compliant as it is very likely that such transfers will be examined by the IRS. Finally, taxpayers who have intended to utilize these transfers as a method of “estate planning” should begin considering more legitimate methods.
Joseph Septimus is a tax and estate planning attorney with Kostelanetz & Fink, LLP and can be reached at firstname.lastname@example.org.
(Joseph Septimus – YWN)