IRS Cracks Down on Gifts of Real Estate
The IRS has begun checking land records in certain states, including North Carolina, to compare uncompensated, mainly intra-family gifts of real property to filed gift tax returns. Generally, gifts of any property over the $13,000 annual exclusion (up from $10,000 a few years ago) must be reported on a federal gift tax return for the year. See this recent Forbes article.
I encounter situations frequently where no gift tax returns where filed for gifts of real estate. Real estate lawyers who draft the deeds often do not advise clients on the tax consequences of the gift. Before ANY gift of real estate, persons should consult with tax counsel. There are also income (capital gains) tax issues to consider
If you have made any such transfers in the past, see a CPA or tax attorney immediately about filing the overdue returns. For North Carolina real property, gifts prior to 2009 must be reported on a North Carolina gift tax return as well, and any applicable tax paid.
