IRS Using State Property Records to Identify Gift Tax Non-Filers

by Bruce Givner on April 4, 2012

According to the IRS, sixty to ninety percent of taxpayers do not file a gift tax return after engaging in a transaction that requires a gift tax return be filed.  To collect this missing revenue, the IRS is now reviewing public state and county property records to identify intra-family land transfers made for little or no consideration.

With a cap on property tax increases, the IRS asked the California Board of Equalization (BOE) to turn over their records on certain intra-family transfers.  Though state or county agencies in fifteen states complied, the BOE did not.  According to the BOE, a state statute requires a court order to disclose personal information.

To facilitate acquiring a court order, the Department of Justice, on behalf of the IRS, filed suit against Joe Doe taxpayers who transferred real property in California for little or no consideration between January 1, 2005, through December 21, 2010,. . . [and for] which information is in the possession of the [BOE]. . . .”

The Court refused to issue the summons citing that the records the IRS sought were available from a source other than the BOE – the county assessor’s office.

In the last two years, the IRS has audited over 300 taxpayers for failing for file gift tax returns related to gifts of real property.  While a gift tax violation was found in over thirty percent of these audits, only four percent resulted in an assessment of tax and penalties.

If you need advice on intra-family land transfers or gift taxes, call Givner & Kaye at (310) 207-8008.

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