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No 709'S Ever. Oh My!

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    No 709'S Ever. Oh My!

    I have recently learned of a family member who has been giving to another family member for most likely over 25 years. The asset types have been automobiles and cash only.

    Surprize 709 has ever been filed. The amounts have usually, but not always, been in excess of the annual exclusion. The giver has been aware of the gift exclusion so in some years wrote on her check in the memo filed things like "dad, mom, child a, b, c" etc.

    We all know this is common. If one just stops to think about it.

    I have never done a 709. I am going to ask a couple of pointed questions without spelling out the history because I don't know what else you may want factually to comment. However, suffice it to say this giver will be right up against the current (as in $10m) combined exclusion amount if she were to pass today. She is 68 and in excellent health.

    1. How many years, including zero, would you file backward?

    2. What has been your experience or what have you "seen" regarding this scenario?

    I had a situation similar to this several years back. My client (Father) was gifting above the annual threshold to his adult son (not my client) for several years to avoid foreclosure of home, and pay some personal debts. At that time this was not disclosed to me. Then the son applied for a Federal law enforcement job and they were going to do a complete background check. I was called by my client's attorney and told that the father had gifted for 3 or 4 years to his son and a belated 709 needs to be filed. I complied with the request and to my knowledge there was no audit or penalty charged.
    Taxes after all are the dues that we pay for the privileges of membership in an organized society. - FDR


      "been in excess of the annual exclusion. The giver has been aware of the gift exclusion"

      Based on that, I would file zero returns because the client would no longer be my client if they were intentionally not filing required tax returns. :-)

      Most likely, all years should be filed. You could call the IRS for confirmation, but I can't imagine them saying to only file a certain number of years (because it is based on a Lifetime amount).

      Is suspect there would not be a penalty, as the penalty is the same as Individual tax - based on the amount owed (which is $0 for the Gift Tax returns). However, I suspect they hypothetically might be able to apply the undervaluation penalty, but I doubt if they would.