In our last post, we noted that the IRS is currently in an effort to audit land-transfer records from at least 15 states for evidence of omissions of gift reporting. Failure to report gifts of real estate for gift tax purposes is, apparently, a common problem in a number of states.
The Wall Street Journal notes that the IRS investigation is somewhat under wraps. In one of its summons for land-transfer data issued to the California State Board Equalization, the IRS used “John Doe” as the name of the requesting party. The summons ware reportedly required because of state law which complicates real-estate transfer data.
According to that document, 323 taxpayers had been examined over the last two years for failing to report potential gifts. An additional 217 were still under examination, according to the document, and the IRS is still considering whether to examine another 250.
An IRS spokesman involved in the California investigation said 97 individuals failed to reports gifts, and twelve had already resulted in taxes or penalties as a result of making a gift that put the donor over his or her $1 million lifetime gift tax credit, the applicable amount at the time.
The IRS also published a chart which estimated that gift tax noncompliance is at around 60 percent in Connecticut, 90 percent in Florida, 60 percent in Nebraska, 90 percent in Virginia, 80 percent in Washington, 50 percent in Wisconsin, and 100 percent, believe it or not, in Ohio. While 15 states have already handed over information concerning gift-like transactions, others are being considered for audit.
Gift tax returns must be filed on the transfer of property valued in excess of $13,000. There are no special exceptions to the reporting requirement.
Source: Wall Street Journal, “IRS Scrutinizes Gifts of Real Estate,” Arden Dale, 27 May 2011.