Trying To Avoid Gift Taxes? The IRS May Be Coming For You!

Earlier this year the IRS filed a lawsuit against the California Board of Equalization due to the board's refusal to turn over records on real estate transfers made to relatives with little or no consideration for taxation between 2005 and 2010. The BOE claimed they did not need to comply due to privacy laws.

A California Eastern District federal judge just ruled that the IRS can now serve 'John Doe' summons on the BOE. This will allow the IRS to obtain a list of names of California property owners who gifted real estate between 2005 and 2010 to their children and/or grandchildren. With these lists the IRS will be able to determine those property owners that failed to report gifts of real estate and file federal gift tax returns that had exceeded the annual gift tax exclusion during this time period.

The gift tax is a commonly misunderstood tax. You should consult with an estate planning attorney if you are not sure whether or not gifts you've made should be reported to the IRS. Don't start out 2012 with tax interest and penalties!

*This blog entry was not written by an Attorney and should not be constituted as professional legal advice.