CCA 1030029: Amended gift tax return could disclose a trust gift

Plain-English summary

Chief Counsel Advice addresses a gift to a trust that was reported on Form 709 but may not have included enough information to start the gift tax assessment period. Because the taxpayer had already filed a gift tax return reporting the transfer, the IRS could not entertain a private letter ruling request about the matter. The advice explains that an inadequately disclosed gift may be assessed at any time under sections 6501(c)(9) and 301.6501(c)-1. The taxpayer could file an amended return with the additional trust information, after which the IRS would decide whether to audit the return.

Ruling snapshot

• Question: Could the taxpayer obtain a ruling or otherwise start the limitations period after reporting a gift to a trust?
• Outcome: Advice given
• Key authorities: IRC §§ 6501(a) and 6501(c)(9); Treas. Reg. § 301.6501(c)-1(f); Rev. Proc. 2010-1

Full text (IRS public release)

ID: CCA_2010070913445406 Number: 201030029
Release Date: 7/30/2010
Office: ----------------
UILC: 6501.04-00

From: -------------------
Sent: Friday, July 09, 2010 1:44:55 PM
To: -----------------------------------
Cc:
Subject: [ -------------------------]

This responds to a June 29, 2010 email from ----------------. The email included a letter
from Congressman --------------and a letter from Congressman --------constituent, ----------
-----------------------(Constituent). The letter from Constituent indicates that a taxpayer
related to Constituent made a gift to a trust and filed a Form 709, United States Gift
(and Generation-Skipping Transfer) Tax Return, reporting the transfer. The taxpayer,
however, is concerned that the gift was not properly reported. The taxpayer is also
concerned that the period of limitation on assessment and collection under section
6501(a) has not commenced because certain information was not attached to the Form

709. Finally, Constituent suggests that the Internal Revenue Service (Service) enter
     into a Closing Agreement with the taxpayer to resolve the uncertainty over the matter.

In his email, ------------suggests that the taxpayer seek a private letter ruling from the
Service.

You may include the following in your response to Congressman -----.

Section 5.01 of Rev. Proc. 2010-1, 2010-1 I.R.B. 1, 10, provides that, in gift tax matters,
the Internal Revenue Service generally issues a letter ruling on a proposed transaction
or on a completed transaction if the letter ruling request is submitted before the return is
filed for the year in which the transaction is completed. The letter forwarded from
Constituent indicates that the taxpayer, who is related to Constituent, filed a Form 709
and reported the transfer. Because the taxpayer filed a Form 709 reporting the transfer
in question, the Internal Revenue Service cannot entertain a ruling request on this
matter.

Section 6501(a) of the Internal Revenue Code provides, except as otherwise provided
in this section, the amount of any tax imposed by this title shall be assessed within 3
years after the return was filed (whether or not such return was filed on or after the date
prescribed) or, if the tax is payable by stamp, at any time after such tax became due
and before the expiration of 3 years after the date on which any part of such tax was
paid, and no proceeding in court without assessment for the collection of such tax shall
be begun after the expiration of such period. For purposes of this chapter, the term
 2

“return” means the return required to be filed by the taxpayer (and does not include a
return of any person from whom the taxpayer has received an item of income, gain,
loss, deduction, or credit).

Under section 6501(c)(9), if the value of gifted property is required to be shown on a gift
tax return but is not shown on the return, then any gift tax on the transfer of gifted
property may be assessed at any time. The unlimited assessment period does not
apply if the gift was disclosed on the return in a “manner adequate to apprise the
Secretary of the nature of such item.”

Section 301.6501(c)-1(f)(1) of the Gift Tax Regulations provides that, if a gift is not
“adequately disclosed” on a gift tax return, the tax imposed on that gift may be assessed
at any time. Under § 301.6501(c)-1(f)(2), a gift will be adequately disclosed if the gift
tax return (or a statement attached to the return) includes the trust’s tax identification
number and brief description of the terms of the trust, or, in lieu of that description, a
copy of the trust instrument.

In this case, the taxpayer may file an amended gift tax return for the year in question
and include the additional information that he believes is necessary to adequately
disclose the gift. The Internal Revenue Service will then decide whether to audit the gift
tax return.

------------------of our office is familiar with this case. ---------------can be reached at --------

-------------.

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