Filing FORM 709

[Tracy]

I have a client "giving" an interest in real estate to a parent. Would the IRS view this as a gift, thus requiring filing of Form 709? (The current market value of the interest is $200,000 which is $175,000 above basis.)

If my client doesn't file the 709 within the following year (as required) is it possible to file this at a later time? Would a later filing result in penalty assessment?

I have not previously worked with gifts over the annual limits. So, any insights would be appreciated. Thanks!

[Pacun]

I have a client "giving" an interest in real estate to a parent. Would the IRS view this as a gift, thus requiring filing of Form 709? (The current market value of the interest is $200,000 which is $175,000 above basis.)

If my client doesn't file the 709 within the following year (as required) is it possible to file this at a later time? Would a later filing result in penalty assessment?

I have not previously worked with gifts over the annual limits. So, any insights would be appreciated. Thanks!

Yes, you need to file gift tax return for and report the gain on schedule D (but I think you basis will be brought up if you file 709). Your client will not pay taxes because of the credit. Why do you want to postpone the filing of gift tax return if you have a huge long term gain on the dispossal of real state?

[zeke]

Pacun - Ya done confused me goodly. Original post says nothing about a sale. Just who is realizing a gain to report on schedule D?? I agree that 709 should be filed and that unified credit (probably) will obviate any gift tax actually being due.

Zeke

[Tracy]

Zeke,

You are correct, there is no sale of property. So, no need for Schedule D reporting.

The client's "friend who is a CPA" suggested to the client to take a wait & see approach to the 709 filing. (Probably in an attempt of: don't mention it / don't get caught / don't use part of your lifetime unified credit.)

Thanks for your input.

Tracy

[Linda Mathey]

In the past when clients gave a % of property to their parent or child, we got an appraisal, filed a 709 and reflected on the title the new owner's percentage. This is especially important if the property is property that is appreciating. It locks in the value of the gift.

[michaelmars]

Isn't that one of the items that your clients usualy find written on your ceiling? who needs an appraisal?

[Linda Mathey]

Isn't that one of the items that your clients usualy find written on your ceiling? who needs an appraisal?

I watched from the sidelines while another person in our offices went through a nasty audit upon the death of a wealthy client who did not get appraisals when gifting property and shares of stock in their closely held company. Instead the client had relied upon non-professionals to set the value. The IRS "pulled" large amounts back into the estate by arbitrarily deciding that the value at the time of the gift was larger than declared. I usually use that example and if the gift is large enough, they get an appraisal.