As a result of last year’s rush to make substantial gifts before the gift and estate tax laws were set to change (which didn’t end up happening) our office is now faced with helping these same clients prepare and file their gift tax returns (Form 709). Some clients prefer to defer to their CPA for preparation of the return, while some clients and their CPA’s choose instead to have our office prepare the return. Since all of our firm’s estate planning attorneys have either a CPA designation, a master’s degree in tax, or a master of laws in tax (LLM) or some combination of these three, we are well-qualified to assist with the preparation of a gift tax return.
Gift tax returns must be filed on or before April 15 unless an individual extends his individual return which will cause an automatic extension of the filing date for the gif tax return. Of course, any actual gift tax due must be paid on or before April 15, regardless of extension. It is possible for a person to file his or her individual return on or before April 15 and extend their gift tax return by filing form 8892. The extension due date is October 15.
But who must file a gift tax return? For 2012, any gift in excess of $13,000 should be reported to the IRS on Form 709. For most people there will be no actual tax due since the lifetime gift tax exemption amount will “cover” any tax on gifts that do not exceed $5,120,000. For 2013 the numbers above change slightly to $14,000 and $5,250,000, respectively.
For most of the gifts that our office helped our clients achieve, we purposely applied “discounts” to the value of the gift. These discounts include discounts for lack of control and discounts for lack of marketability. There are other discounts that are statutory, such as the discounted gift value under a qualified personal residence trust (QPRT). But in either case, the gift tax return must be prepared and enough information disclosed to the IRS so that the IRS can easily understand the nature and amount of the discount. Unlike an individual Form 1040 which is often just the return itself that is filed; we may actually be providing hundreds of pages of information to the IRS if we are disclosing real property appraisal reports and/or a professional valuation of a business entity which would disclose the valuation discounts taken.
The moral of the story of today’s blog is to demonstrate that one should not try to file a Form 709 alone without professional assistance. Unless a gift is made outright and consists of cash, stock, or real property with an easily demonstrated value, a CPA or tax attorney should assist you with the preparation of your gift tax return. And even though the initial deadline is fast approaching, there is plenty of time to file for an extension, so please contact your CPA or our office if you will require assistance with a gift tax return for 2012.
Attorney Jason C. Walker