Gift Tax Statute of Limitations if Prior Gifts Omitted from Return

The IRS only has three years after a Form 709 is filed to assess gift taxes on a gift, so long as the gift is adequately disclosed on the return. If a gift is not disclosed, the statute of limitations does not begin to run on that gift.

The Form 709 requires disclosures of prior gifts, so that the tax on the current gifts can be properly calculated (since prior gifts can impact the rate of tax and available unified credit applicable to the current year computations).

So what happens if a gift is reported on the return, but the prior gifts are improperly reported, resulting in an underpayment of gift tax? Does the IRS have only 3 years to assess the underpayment, or does the failure to properly report the prior gifts extend the statute of limitations?

A recent Chief Counsel Advice concludes that the Code does not support an extended statute of limitations in this circumstance.

Chief Counsel Advice 201643020