The IRS is checking out records on land transfers in order to catch real estate reporting omissions, reported the Wall Street Journal last week. Calling the effort “low-profile but sweeping,” indicated that as of December 21, 2010, 323 taxpayers had been examined for failing to report gifts of land, while 217 additional individuals were being examined and 250 were being considered for “possible review”. Individuals found to be in violation would be subject to penalties, and tax advisers could also face scrutiny if they played a role in the failure to report a transfer.
Many people believe that gift-transfers of land do not have to be reported if the person making the gift has not exceeded the $5 million lifetime tax-exempt gift limit. However, any parcel of land exceeding $13,000 in worth must have a gift-tax return filed. The IRS reported that many states have 90 to 100 percent non-compliance in this area and lawyers in the field warned that “we can expect additional examinations” of this area of non-compliance as the IRS obtains more land-transfer records.
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