Beware of Unreported Transfers/Gifts of Real Estate
There was an important article that appeared in the May 26, 2011 issue of the Wall Street Journal entitled
"IRS Scrutinizes Gifts of Real Estate." That article discusses a sweeping program by the IRS to detect
unreported gifts of real estate. Many states including New York and New Jersey have provided copies of
deed transfers to the IRS for the last 10 years.
As you may be aware, the current lifetime gift tax exemption is $5 million. This lifetime exemption is
the cumulative amount an individual can give away without the imposition of any gift tax and is in addition
to the $13,000 annual gift tax exclusion. However, the lifetime gift tax exemption prior to 2011 was only
$1 million. The IRS is looking for unreported gifts of real estate to raise significant gift tax revenue.
If an individual made a transfer of real estate (evidenced by recording a new deed) for less than full
and adequate consideration, that transfer should have been reported on a timely filed gift tax return.
The return must reflect the fair market value of the gift as of the date of transfer
(usually by attaching a certified appraisal). If the value was less than the $ 1 million exemption
(taking into account prior taxable gifts), there will not be any tax, interest or penalty due.
However, less exemption will be available going forward. If the value exceeds the $1 million exemption,
the taxpayer will be exposed to potential gift tax liability, plus onerous penalties and interest.
If you have made such a transfer of real estate that was not reported on a gift tax return, it is
important to disclose that gift now. Let us help you navigate the process.
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As required by new U.S. Treasury rules, we inform you that, unless expressly stated otherwise, any U.S. federal tax advice contained in this email, including attachments, is not intended or written to be used, and cannot be used, by any person for the purpose of avoiding any penalties that may be imposed by the Internal Revenue Service.
If you have any questions regarding this matter or any other estate planning techniques, please contact a Maurice Kassimir & Associates, P.C. Trusts & Estates attorney or e-mail us:
Providing sophisticated estate planning to insure the accumulation, preservation and transfer of wealth for clients in the New York Metro area.