United States Government Requests US District Court to Release Property Tax Records from California Board of Equalization

Apr 26, 2011   

The United States Justice Department, on behalf of IRS, has asked a federal judge to issue a “John Doe” summons on the California Board of Equalization requiring the board to turn over records of property transfers for little or no consideration (In Re the tax liabilities of John Does, E.D. Cal., No. 2:10-mc-00130-MCE-EFB, filed 12/27/11).

In the gift tax area, this is the first reported time that the IRS has attempted to use John Doe summons to obtain information. The investigation relates to taxpayers who transferred real property between 2005 and 2010. “Based on information received from examinations across the country and information voluntarily disclosed by other states, the IRS has determined that taxpayers who transfer real property to a related party for little or no consideration frequently fail to file Form 709 and report this transfer, despite the fact that they are required to do so by the internal revenue laws,” wrote Josephine M. Bonaffini, Federal/State Coordinator of IRS Estate and Gift Tax Program in a declaration filed with the District Court. “Thus, the IRS has a reasonable basis to believe that a significant portion of the California taxpayers who have transferred property to their children or grandchildren (as reported to the BOE on forms for exclusion of reassessment) for little or no consideration have failed to report these transfers to the IRS.”

Because no statute of limitations applies to gift tax returns, the recipient of the gift will be liable to pay gift tax if the donor fails to do it. The IRS reportedly has teams in Florida, Nebraska, New York, North Carolina, Ohio, Washington, and Wisconsin working on gift tax compliance. Unsurprisingly, many states and counties have voluntarily disclosed their property transfer data. Public data reveals that 323 taxpayers have been examined for failing to File Form 709 and another 217 are currently under examination.

The attorneys at Fuerst Ittleman, PL have experience representing taxpayer in IRS audits and litigation before the U.S. Tax Court, U.S. District Courts, and U.S. Courts of Appeal. You can contact us by emailing:contact@fidjlaw.com.