Amend Gift Tax Return

[MarkCTX]

Client gave gifts in 2012 that exceeded annual exclusions. Form 709 was timely filed and no gift tax due. Client also gave gifts in 2013 that exceeded the annual exclusion but has not yet filed the Form 709 for 2013. There is no tax due for 2013. It has come to light than an error was reported on the 2012 Form 709. The Form 709 instructions make no mention of amended returns, however the software will prepare one. Changing 2012 makes no change in the tax (tax was zero). One solution is to adjust prior period unified credit amount on the 2013 Form 709 when it is filed and move forward. My research reveals that Internal revenue Manual 21.7.5 discusses amended gift tax returns and how they should be processed, but mostly where a change in tax occurs. My question is MUST client file amended return when no change in tax occurs? Client points out that she would like to file only 1 return (2013 Form 709) and not 2, the second being the amended 2012 return when an amended return may not be required. Anyone have any experience with this issue?

Mark

[Kram BergGold]

My Take

I would prepare 2013 and adjust the credit used up in 2012 to the correct amount. I am not saying this is correct, but it is a case of no harm no foul. I sometimes do this on Form 8582 when someone files without a K-1 and the only affect of the K-1 is to raise or lower the suspended loss. My feeling is the IRS has no use for 1040-X forms with no change in the tax.

[MarkCTX]

That is exactly what I am going to do. My research reveals per Rev Proc 2000-34 that the information must disclose the nature of the gift and the basis for valuation. There is no tax to change and it's doubtful the unified credit will be exceeded when this elderly client passes on. There is also no authority to prepare amended returns and court cases have called amended returns "a creature of administrative origin and grace."

Thanks for your response.

Mark

[New York Enrolled Agent]

That is exactly what I am going to do. My research reveals per Rev Proc 2000-34 that the information must disclose the nature of the gift and the basis for valuation. There is no tax to change and it's doubtful the unified credit will be exceeded when this elderly client passes on. There is also no authority to prepare amended returns and court cases have called amended returns "a creature of administrative origin and grace."

Did you miss the part in Rev Proc. 2000-34 that specifically addresses amended Forms 709 and the correct procedure to file them? Maybe, you didn't read the whole document?

There is no statute that requires the IRS to accept an amended return but I think you may be a little cavalier in your attitude about correcting an error and filing a proper return.

[Roland Slugg]

I would prepare 2013 and adjust the credit used up in 2012 to the correct amount.

That is exactly what I am going to do.

I would advise against that. Would you also correct an error in a prior year's capital loss by changing the carryover amount shown on the following year's return? Or the amount of an NOL? Or the amount of a PAL carryover? Such non-traceable "corrections" are invalid and will fail to accomplish their intended purpose if the IRS happens to catch them. The proper way ... the only valid way ... to correct mistakes on a filed return is to file an amended return.

It is true that the instructions for F-709 do not say anything about amended returns, but that doesn't mean they aren't allowed. All you do us use a regular F-709, marked "Amended Return" at the top, and attaching an explanation of the changes.

Here is a link to an article by the AICPA covering many estate and gift issues, including this one. See page 14.

http://www.aicpa.org/InterestAreas/Tax/Resources/taxplanning/DownloadableDocuments/2%2019%2013%20slides%20AICPA20130219-Presentation-815448.pdf