Archive for Gift Tax

Some Taxes You Pay Are Deductible


Certain taxes you have paid can be allowable as itemized deductions. To be deductible, these taxes must have been imposed on you personally, and you must have paid them during the year.

The following taxes you paid during the year are deductible on Schedule A:

• State and local income taxes (from your W-2).
• Real estate taxes (deductible in the year you paid them).
• Personal property taxes charged on the value of personal property.
• Foreign income taxes paid.

Note carefully, however, that the following taxes are not deductible: Read more

IRS Issues Guidance on Estate-Gift Tax Pre-Appeals Conference Procedures

TaxConnections Picture - Audit Magnifying Glass B - 2 - square

IRS’s Small Business/Self-Employed (SB/SE) Division has issued interim guidance to its estate and gift tax auditors on procedures to use in connection with a taxpayer whose estate tax, gift tax, generation-skipping transfer tax, fiduciary income tax, or information return is being examined by estate/gift tax auditors, being eligible for an IRS Appeals conference.

After an IRS auditor completes an examination of a taxpayer’s tax return with respect to which the auditor wishes to propose adjustments, IRS provides the taxpayer a letter, a “30-day letter,” together with a computation report of proposed adjustments to the tax return. Read more

Compliance 2014 – Capital Acquisitions Tax – Ireland

Columns of coins and red bow

The 2010 Finance Act introduced a fixed pay and file date for all gifts and inheritances with a “valuation date” after 14th June 2010. As a result, the Capital Acquisitions Tax year runs from 1st September to 31st August in the following year.

C.A.T. arising on gifts/inheritances, where the “valuation date” falls within the twelve month period ending on 31st August in a particular tax year, must be paid and filed with Revenue by the 31st October of that year.

What do we mean by “Valuation Date”?

The “valuation date” is the date on which the property making up the gift or inheritance is valued. The “valuation date” for a gift is the date the individual receives the gift but Read more

Are Gift Tax Audits On The Rise?

Columns of coins and red bow

The IRS 2012 Data Fact Book reports that 258,393 gift tax returns (Forms 709) were filed that year compared to 219,544 in 2011.  The most striking difference between the two years is the aggregate amount of the gifts, which totaled about $135 billion in 2012, reflecting an increase of $84 billion, or 165 percent, over the 2011 total of $51 billion.  Many 2012 gift tax returns were filed in 2013 because the Internal Revenue Service allowed the taxpayer to submit Form 709.

Have a Gift Tax Audit Problem? Gift Tax Audits Require an Experienced Tax Attorney.

Read more

DOMA Tax Issues – Still Outstanding

TaxConnections Picture - Same Sex - Two Rings 1 - square

Someone recently asked me what federal tax issues are still outstanding regarding DOMA and the effect of the June 2013 Windsor decision. There are still a few income tax issues that come to mind (there are also estate and gift and state tax issues as well), that were not covered in the initial guidance (Rev. Rul. 2013-17). Here is my list. Do you have any input or additional ones to add?

Amended Returns

Will the IRS issue guidance to assist in the filing of amended returns? The current version of Form 1040X is not conducive to showing how two prior separate returns will now be treated as one MFJ return. Read more

Gifts From Foreign Corporations Included As Gross Income

Cash wrapped Gift Box

When a U.S. person receives certain gifts or bequests from foreign corporations, those amounts may be considered as part of the U.S. person’s gross income under US International Tax regulations. The Internal Revenue Code’s regulations specifically state that when a “purported gift or bequest” is received “directly or indirectly,” the amount is included in the U.S. person’s gross income “as if it were a distribution from the foreign corporation” (1). As a result of this characterization, the purported gift or bequest has two possible treatments for tax purposes: as a dividend to the extent of the corporation’s earnings and profits, and as capital gain to the extent of the corporation’s excess over earnings and profit. Read more

How To Treat Gifts And Bequests From Foreign (Non-US) Persons

Cash wrapped Gift Box

If you are a US citizen or resident and you receive gifts or bequests (generally, an inheritance or gift of property by a Will) of money or other property from a foreign (non-US) person or entity, you may need to report these gifts on Form 3520, Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts. Form 3520 is an information return, not a tax return. Many people receiving gifts or bequests get very confused. They mistakenly believe that they have to pay tax when they receive a gift or bequest. This is not the case – bona fide gifts or bequests are not subject to income tax in the hands of the recipient. This remains the case regardless of whether the person giving the gift is a US person or a foreign person. It remains the case regardless of the amount of the gift or bequest. Read more

IRS Reporting Requirements For Gifts From A Foreign Person

Cash wrapped Gift Box

Certain events, such as when a U.S. taxpayer receives a gift from a foreign person, trigger an international tax filing requirement. This event triggers the requirement to file form 3520. In general, the Form 3520 is merely an informational return, as foreign gifts typically do not result in tax consequences for the taxpayer. However, there are some significant penalties for failing to file a Form 3520 in connection with a foreign gift (1).

What is a Foreign Gift?

A foreign gift is money or other property received by a U.S. taxpayer from a foreign person. To be considered a foreign gift, the recipient must elect to treat the property or money as a gift or bequest, and exclude the amount from gross income. Note, however, that amounts paid for qualified tuition or medical payments made on behalf of a U.S. person are not Read more

Foreign Trusts and Installment Sales

Cash wrapped Gift Box

A United States Settlor of an irrevocable Foreign Trust having a United States beneficiary is deemed to be the owner of the Foreign Trust. Subject to statutory exceptions, the Settlor is the taxable party regardless of whether the Settlor has released all dominion and control of the trust assets by an irrevocable transfer and the right to alter, amend, or modify the trust document. This is the income tax treatment of a United States Settlor by Section 679 of the Code. (1) Because the Settlor is treated as the owner of the trust assets, the transfer of appreciated assets to a Foreign Trust does not occasion a taxable event as contemplated by Section 684 of the Code. Read more

Senate Finance Committee Blank Slate Project 2013 – Senator Rockefeller’s Suggestions

TaxConnections Picture - Gavel and Flag - square
Evaluation of Senator Suggestions for the Blank Slate Project

As noted in my 9/9/13 post, I’m going to summarize and analyze proposals senators offered to the Senate Finance Committee, and that the senator made public. Despite falling behind on my project, as tax reform likely heats up in 2014, I’m back at it as I’d like to look at and share what might be a broader array of proposals and issues. In no particular order, the second set of suggestions I’m commenting on are from Senator Rockefeller (D-WV) (7/26/13 letter). Senator Rockefeller is a member of the Senate Finance Committee.

Read more

Israel/South Africa Expatriates Face Costly New Tax Rules

Israeli Flag

In terms of the Right of Aliyah doctrine (the right of every Jew to immigrate to Israel) every Jew going to or intending to go to Israel will be granted an Oleh’s visa. Oleh, for my colleagues not dealing with Israeli law (plural: olim) means a Jew immigrating into Israel. The Oleh Visa is granted by mere expression of the interest to “relocate” to Israel as a qualifying Jew (albeit born outside Israel after 1950).

A person shall not be registered as a Jew by ethnic affiliation or religion and will be denied Oleh Visa, despite being a Jew as defend, inter alia because of political status / activity (i.e. is engaged in an activity directed against the Jewish people or which is likely to endanger public health or the security of the state of Israel) or secondly, where a notification (issued under the Law of Return 5710-1950 as amended by Law of Return Read more

Don’t Gamble With Gift Tax Returns

Picture From Mike DeBlis Post

Beginning in 2011, the Internal Revenue Service started cracking down on taxpayers who did not file gift tax returns after making gifts that required reporting. Working with state or county agencies, the IRS started using real estate property records to spot land transfers between family members for no or little consideration, according to an October 2011 Forbes magazine article. Taxpayers who are caught not filing a gift tax return and owe taxes can count on paying the failure-to-file penalty along with interest charges.

a. Who Must File

You do not have to file a gift tax return as long as the amount you give to one person does not exceed $ 14,000 (for the 2013 calendar year). If you are married, you and your spouse Read more