Idahoans Beware of the Time Traveling IRS

Why wouldn’t you file a gift taxreturn if you made a taxable gift? Well, for a lot of people, the answer mightbe “I didn’t know it was required.” But, in this case, Redstone argues thetransfer wasn’t gift, but rather the result of an “intra-family lawsuit” andthus “an ordinary business transaction.” 

So, how long does (or can) theIRS scour your financial history to find taxable gifts? Well, it seems they do(or can) go back some 41 years. Whether you are a billionaire or a regular“Joe,” this case is worth watching.

You can get the high points ofthe case from a recent Bloombergarticle titled “Billionaire Redstone Challenges IRS on Taxfor 1972 Gift.” Normally the IRS is bound by a statute of limitations setto about three years. However, an exception to this rule includes the failure to file a tax return like theallegedly missing gift tax return of Mr. Redstone.

Apparently, the difficulty aroseover certain shares of National Amusements Inc., and a family lawsuit resultingin a “transfer” of shares. The IRS is now calling that “transfer” a “gift” with$1.1 million in taxes, penalties, and interest due and owing.

According to Richard Behrendt, aformer estate and gift tax auditor turned director of estate planning, “This isunheard of… I can’t remember ever hearing of anybody going back 41 years toraise an issue. It’s really unprecedented in my experience.”

Note: Mr. Redstone may havebecome a target, given the fact he is the chairman of both Viacom and CBS, notto mention National Amusements and all the related subsidiaries of the three.Reportedly, Mr. Redstone is worth approximately $4.9 billion. Nevertheless,this 41-year-look-back is a troublesome precedent.

The take-away (even if you havea smaller fortune) is that timely filing of an accurate gift tax return willstart the clock running on a three-year statute of limitations. If no gift taxreturn is filed, the statute does not apply. Thus, if a taxpayer fails to filea gift tax return, the IRS can pursue you indefinitely.

For more information on this and otherestate planning subjects, contact IdahoEstate Planning and schedule aconsultation. Remember,good planning is no accident.

Categories: Estate Planning, Taxes
Rate this article:
No rating

Please login or register to post comments.