Source: http://rubinontax.floridatax.com/2012/12/
Timestamp: 2019-04-21 16:11:07+00:00

Document:
a. Making Lifetime Gifts of Property to U.S. Persons that are Subject to U.S. Gift Tax Instead of Testamentary Transfers. Under normal U.S. gift tax rules, gift taxes are tax-exclusive if the donor survives the gift by three years. That is, the taxes themselves are not considered by the gift – there is no tax on the tax. However, §2801 taxes are tax inclusive – thus, they are taxed at higher effective rates. So, similar to the same considerations that apply to U.S. donors, a lifetime gift bears less taxes than a testamentary gift. Since this does not work if the gift is taxed under §2801, the gift must be of property that is otherwise subject to U.S. gift taxes aside from the expatriate status of the donor. This is because §2801 will not apply to a gift of a nonresident that is otherwise subject to U.S. gift taxes. Thus, the donor should use property that is U.S. situs property for gift tax purposes, such as U.S. real property, to make the gift.
b. Make Use of Double Annual Exclusion Gifts. It is likely that if a donor makes an annual exclusion gift of U.S. situs property and of non-U.S. situs, each gift can benefit from a $14,000 annual exclusion. One exclusion is the regular exclusion that applies to U.S. situs assets under the regular gift tax rules, and the second is the annual exclusion that is granted to the donee under §2801.
c. Consider Making Generation Skipping Transfers of Non-U.S. Situs Assets. Transfers of non-U.S. situs assets will still be subject to tax under §2801. However, there is no GST tax under §2801 so when appropriate, a generation skip can be included in the transfer to avoid future transfer taxes.
d. Carefully Allocate U.S. Situs Property and Non-U.S. Situs Property Between U.S. and non-U.S. Recipients. The goal here is to transfer the U.S. situs property to the U.S. people, since it will be taxed under the normal nonresident transfer rules or §2801 – either way. This leaves non-U.S. situs property to go to nonresidents, free of U.S. transfer taxes – if U.S. situs property is instead transferred to them, then U.S. transfer taxes would apply.
Time is running out for 2012 gift giving. End of year gifting by check is always an issue for those trying to use their annual exclusion amounts, but in 2012 the issue also relates to those attempting to make larger gifts to use their unified credit amounts before the scheduled reduction of the unified credit in 2013.
(5) the check was deposited, cashed, or presented in 2012 and within a reasonable time of issuance.
In a recent Chief Counsel Advice, a taxpayer made a gift in the prior year, but did not file a gift tax return. The taxpayer later died. On the estate tax return for the taxpayer, the earlier unreported gift was reported.
The IRS concluded that a gift tax was due for the year of the unreported gift. This resulted, even though the taxpayer had available unified credit in the year of the unreported gift to avoid gift tax in that year. The quirk in this case is that the taxpayer used her unused unified credit against gifts made in a later tax year, which tax year was then closed for statute of limitation purposes at the time of the IRS adjustments. Since the IRS could not apply unified credit in the earlier year, and then assess gift taxes in the later years (because the statute of limitations was closed), the only recourse for the IRS was to deny the use of the credit in the earlier year. The theoretical basis for such a special determination was the consistency doctrine, per similar facts and issues addressed in PLR 199930002.
Interestingly, interest on the unreported gift was determined to run from the due date of the return for the unreported gift year, and not from the due dates of later years when gift tax would have been imposed if all the gifts had been reported in order. While one perhaps can justify the loss of the use of the unified credit in the earlier unreported year, it does seem inappropriate to charge interest from that year since in no circumstance would taxes have had to been paid in that year.
Taxpayers may be tempted to exaggerate the amount of money they earn when submitting credit or mortgage applications so as to qualify for loans or increased credit limits. This could come back to haunt them, however, in an income tax audit.
That is what happened to Carol Trescott, a massage therapist. She was audited, and she did not cooperate with the IRS. So the IRS used the amounts she listed as income on a credit application as income on a return they prepared for her (since she did not prepare a return herself for the tax year). Carol objected, claiming this was not a reasonable basis for computing her income. The Tax Court disagreed, and accepted the IRS return amounts.
In most audit circumstances, the taxpayer will have prepared a return, so the IRS will not be preparing one for them. However, even when there is a return, if the auditor notes a material difference in income reported on the return and what was used by the taxpayer on a credit application, the auditor’s suspicions will be aroused. That is never a good thing to have happen on an audit.
The IRS has issued new guidance regarding the issuance of international taxpayer identification numbers for non-U.S. taxpayers.
1. Identification documents in most circumstances will not need to be mailed to the IRS with the Form W-7 application. Taxpayers may instead have them reviewed by a Certifying Acceptance Agent, by the IRS at key Taxpayer Assistance Centers, by certain U.S. Tax Attaches, and other alternative reviewers.
1. ITINs will now expire after 5 years.
2. The recent requirements for original identity documentation, or copies certified by the issuing agency (instead of accepting notarized copies of documents) are kept in place.
3. Certifying Acceptance Agents will have to take formal forensic training to help them identify legitimate identification documents.

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