Iowa Ag Lawyer|Better Behave
NE Iowa Farmer Aug 2011
Better behave, IRS is watching Gifts, Santa Claus!
Many people are taking advantage of the change to a $5 million life time per person gift tax credit and despite the carry over basis, assets are being transferred to the next generation before congress changes its mind about the credit. However, any time a gift to one person exceeds $13,000 a year, the giver is supposed to let the federal tax agency know by filing a gift tax return, even if no tax is due. That part seems to be escaping the attention of gift givers and until recently, the IRS.
The IRS has an effort under way to find out about these transactions. According to an agency estimate, between 60% and 90% of transactions that appear to be gifts of property to family members weren’t reported to the IRS,
It’s using land-transfer records from at least 15 states for evidence of omissions and is seeking the records of more states, including the high-priced property states like California.
States that have released information on gift-like transactions to the IRS include Connecticut, Florida, Hawaii, Nebraska, New Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Tennessee, Texas, Virginia, Washington and Wisconsin. Iowa ag attorneys have been watching the steady climb of land prices, it is no suprise the IRS is as well.
With national magazines like Newsweek and the Wall Street Journal talking about the high price of Iowa farm ground, I wouldn’t be surprised if Iowa is also being targeted. No report on if Santa Claus’s nice list has been subpoenaed yet.
Taxpayers need to be aware that no special exceptions to the rules exist when making a transfer to a family member. If the property is valued at more than $13,000, a gift-tax return must be filed. Even if the transfer falls within a lifetime exemption a reporting requirement still exists. The gift tax return is generally due 15 April of the year following the gift.
For anyone who has already made a gift but has not filed a federal gift-tax return, it is better to file late than not at all. Voluntary disclosure typically works out better than having the gap discovered in an IRS audit. Also, even if the person who gave the property has died, the IRS can collect tax from his or her estate, the person who recieved the gift, and in some cases, the executor. An Iowa ag lawyer deals with estates and land values and is in a position to help you determine if you or your parents have run afoul of this rule.