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Don't forget the gift tax. (IRS News).

When you're preparing income tax returns this year, make sure to include any information on gift taxes. Here are a few pointers:

* You must report on Form 3520 gifts over $100,000 from nonresident alien individuals or foreign trusts. One copy of the form must be attached to your federal return and another must be filed with the Philadelphia Service Center (IRS, Philadelphia, PA 19225) by the Form 1040 due date, including extensions.

* You can obtain an extension to file Form 709 along with Form 1040 extension on Forms 4868, 2688 or 2350. If you're not extending the income tax return, request an extension by sending a letter to the Cincinnati Service Center (IRS, Cincinnati, OH 45999).

* Chuck Morris, Estate & Gift Territory 5 manager, has indicated that each gift tax return is surveyed for "adequate disclosure" after it is received. Only those with adequate disclosure are selected for audit because the others can be challenged when the donors Form 706 is filed.

* The IRS has been applying the "step transaction' doctrine to gift taxes and its actions have been upheld in the Tax Court. See Estate of Marie Bies (TC Memo 2000-314) and Schuler (82 F.3d 575 (CA-8) 2002). The doctrine was an income tax concept developed by the courts to collapse steps in a transaction to determine the proper tax treatment.
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Publication:California CPA
Article Type:Brief Article
Geographic Code:1USA
Date:Mar 1, 2003
Words:223
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