2011 Gift Tax Returns Or Extensions Are Due Now
By: David M Frees III, JD
Chairman – Trust Estates and Wealth Preservation
Failure to file a gift tax return can subject a tax payer or their family to serious problems both during lifetime and at death (when the IRS often detects the failure to file).
So if you made a gift in 2011 make sure to consult your legal and/or tax advisers to determine whether or not you are required to file a 709 Gift Tax Return.
These returns are due by tax day. This year, since April 15th falls on a Sunday, returns can be filed no later than tax day for income tax returns.
If you are either unsure of whether or not you need to file, or if you lack the information to complete the return, then file an extension.
When are returns required or advisable?
1) Consider filing a return anytime you have made a gift to an irrevocable trust. In the case of irrevocable trusts it is also important to know whether or not the trust is a generation skipping trust.
2) You are required to file a return anytime the value of the gift exceeds $13,000.00 in 2011.
3) There are exceptions when you are paying tuition in excess of $13000.00 so long as the payments are directly to the institution.
4) Consider filing a gift tax return whenever you are making a gift of a hard to value asset of you are claiming as discount off the market value of the asset even when the value appears to be under the $13,000.00 limit. Returns are required for gifts to a trust, or directly, whenever the value of the gift exceeds $13,000.00.
5) Remember, that the fact that you will have to file a return does not mean that you’ll owe tax. In fact, for calendar years 2011 and 2012 each tax payer has a total $5 million dollar exemption. However, it is still necessary to file the return to use this extratax exemption.
Furthermore, there are additional complexities involved in using your exemption so if you are considering the gift of cash, stock, real estate or business interests to a friend, family member or anyone else, be sure to consult counsel as failure to follow the rules and to file a correct 709 for 2011 or 2012 can have many untended and negative outcomes.