Estate Planning Pitfall: You’re unsure whether you need to file a 2012 gift tax return

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Explore:  Gift-Tax Return

If you transferred anything of value to another person during 2012, consider whether you need to file a gift tax return. Some transfers require a return even if you don’t owe tax. And, in some cases, it’s desirable to file a return even if it’s not required.

Generally, you’ll need to file a gift tax return for 2012 if, during the tax year, you:

  • Made gifts that exceeded the $13,000-per-recipient gift tax annual exclusion (other than gifts to your spouse that qualify for the marital deduction),
  • Made gifts that exceeded the $139,000 annual exclusion for gifts to a noncitizen spouse,
  • Made gifts of future interests — such as remainder interests in a trust — regardless of amount,
  • Contributed to a Section 529 college savings plan for your child, grandchild or other loved one and wish to accelerate up to five years’ worth of annual exclusions ($65,000) into 2012,
  • Made gifts that you wish to split with your spouse to take advantage of your combined $26,000 annual exclusions, or
  • Made gifts of jointly held or community property.

No return is required if your gifts for the year consist solely of annual exclusion gifts, present interest gifts to a U.S. citizen spouse, qualifying educational or medical expenses paid directly to a school or health care provider, and political or charitable contributions.

If you transfer hard-to-value property, consider filing a gift tax return even if the transfer isn’t taxable. Adequate disclosure of the transfer in a return triggers the statute of limitations, preventing the IRS from challenging your valuation more than three years after you file.