I need some help with a gift tax return. A new client which owns the majority interest (85%) in a LLP has filed gift tax returns for 2013 and 2014 to transfer an ownership interest valued at less than $14,000 to the son and daughter. When I review the gift tax returns, schedule a, question A "does the value of any item listed on Schedule A reflect any valuation Discount?" is marked no on both returns. So as I am calculating what I feel would be a % of the LLP that would be gifted without application of the discount I cannot come anywhere close to what has been done in the past. This LLP hold primarily farm real estate that is being rented out. Upon discussion with the client and further investigation with the prior accountant it is discovered that there was a 25% lake of marketability discount applied to the gift. This has many questions coming to mind. One, since the gift is under the annual exclusion why even file a return? Two, are you required to file a return if a discount is applied even if under the annual exclusion? Three, as I read it appears the filing of the return as long as adequate disclosure of details are included starts the statue of limitations, did the prior accountant think they could rely on this to allow the discount to stand even though the answered the question incorrectly? Four, is the 25% lack of marketability a reasonable default that I can continue to use but disclose on the current gift tax return? HELP, any suggestions will be greatly appreciated. I would sure like to think that answering the question re: any discount applied no was a mistake, but it has happened two years in a row and I would have thought if you were applying these discounts to gift tax returns you would know it needed to be disclosed. Thank you for your help. I am just trying to help my client out of what would appear to be a bad situation.