There are so many reasons to get professional tax advice before adding someone to a deed or transferring real property outright. There can be serious and costly consequences. Yet so many people just won’t take the time to seek the information or get the advice. When someone comes in to our office to have a deed prepared, we’d like to be sure that they know what they’re doing. Because we prepare legal documents under our client’s specific direction and are not tax professionals, we can’t counsel on these matters, except to encourage them to get advice on legal and financial matters that we are not licensed to practice. Well, here’s the best reason, to get the professional tax advice that we’re talking about: Big Brother is watching you.
On March 24, 2011 William P. Barrett warned in Forbes Magazine that the Internal Revenue Service launched a new effort to find people who didn’t report family real estate transfers on their tax filings. IRS Form 709 (U.S. Gift Tax Return) is supposed to be used to report U.S. gift and generation-skipping transfer taxes. Currently, if the property is valued at more than $13,000, a gift-tax return must be filed. Although the gift tax can go up to 35%, many exemptions exist, which is why it’s so important to talk to a tax professional. The IRS is filing documents in Federal Court to get and review individual state’s land-transfer records for evidence of omission. So far 15 states have handed over information on gift-like transactions, which showed an “extremely high failure to report rate”. It’s expected that more records from more states will soon be requested.
In December 2010, the IRS filed documents in a Sacramento Federal Court for the authority to order California’s Board of Equalization (BOE) to hand over its information on everyone who transferred real estate to relatives for little or no money from the period 2005 to 2010. When someone transfers property to a child or grandchild, documents are provided to the tax assessor to limit the annual property tax re-assessment. This information is then sent to the BOE and entered into a database. The IRS is going after that database to compare the names with the names of people who filed IRS Form 709 to see if anyone’s name is missing from the list of Form 709 filers. If you have any questions, or need to file a federal gift tax form, now is the time to contact your tax professional.
Just Doc Prep prepares all types of deeds and most of the transfers we are asked to prepare have little or no tax consequences. However it is everyone’s responsibility to get the most current information from the proper source before having any documents prepared.
