ECC 201614036
Taxpayer made a substantial taxable gift in Year 1, but never filed a gift tax return. The IRS can assess a gift tax at any time, in any subsequent year, because the statute of limitations never begins to run. Sumner Redstone recently learned this lesson the hard way, when he had to pay a gift tax on a transfer made 40 years earlier. Normally, the IRS has only three years in which to challenge a gift tax return.
Now say that in Year 2 Taxpayer reported a large taxable gift. In calculating the amount of gift tax due, he omitted the Year 1 transfers and, therefore, paid less gift tax than he should have. Is that a substantial omission, which would double the limitations period to six years? It is not, the IRS ruled recently. The substantial omission must be with respect to transfers made for the period covered by the gift tax return. It would take a legislative fix to close this gap, the IRS concluded.
© 2016 M.A. Co. All rights reserved.
