If you transferred anything of value to another person during 2012, consider whether you need to file a gift tax return. Some transfers require a return even if you don’t owe tax. And, in some cases, it’s desirable to file a return even if it’s not required.
Generally, you’ll need to file a gift tax return for 2012 if, during the tax year, you:
- Made gifts that exceeded the $13,000-per-recipient gift tax annual exclusion (other than gifts to your spouse that qualify for the marital deduction);
- Made gifts that exceeded the $139,000 annual exclusion for gifts to a non-citizen spouse;
- Made gifts of future interests—such as remainder interests in a trust—regardless of amount;
- Contributed to a Section 529 college savings plan for your child, grandchild, or other loved one and wish to accelerate up to five years’ worth of annual exclusions ($65,000) into 2012;
- Made gifts that you wish to split with your spouse to take advantage of your combined $26,000 annual exclusions; or
- Made gifts of jointly held property.
No return is required if your gifts for the year consist solely of annual exclusion gifts, present interest gifts to a U.S. citizen spouse, qualifying educational or medical expenses paid directly to a school or health care provider, and political or charitable contributions.
If you transfer hard-to-value property, consider filing a gift tax return even if the transfer isn’t taxable. Adequate disclosure of the transfer in a return triggers the statute of limitations, preventing the IRS from challenging your valuation more than three years after you file.
THIS ARTICLE MAY NOT BE USED FOR PENALTY PROTECTION. THE MATERIAL IS BASED UPON GENERAL TAX RULES AND FOR INFORMATION PURPOSES ONLY. IT IS NOT INTENDED AS LEGAL OR TAX ADVICE AND TAXPAYERS SHOULD CONSULT THEIR OWN LEGAL AND TAX ADVISORS AS TO THEIR SPECIFIC SITUATION.
Randall A. Denha, Esq., of Denha & Associates, PLLC is licensed to practice law throughout the state of Michigan and in the state of Florida. Denha & Associates, PLLC, practices in the areas of estate planning, business succession planning, asset protection planning, probate, business, and tax law. For further information, visit www.denhalaw.com or call (248) 265-4100.