Distributees beware! The IRS is now using state land-transfer records to discover unpaid Estate Taxes on gifts of real property to family members.
Although federal exemptions are currently at $5 million, gifts amounting to $13,000.00 or more must be reported to the IRS by filing Form 709 for U.S. gift and generation-skipping transfer taxes.
As a result of these investigations in which the IRS uses land-transfer records as evidence, many people are being examined, and possibly taxed, fined, or penalized.
Lesson: If a gift of real property is worth more than $13,000, even if within the lifetime exemption amount of $5 million, a gift-tax return must be filed or it must be reported!