Penalty for Late Filing Gift Tax Return

[Gail in Virginia]

Does anyone know off hand how penalties for late filing of gift tax returns are calculated? I had a client this year whose husband died in 2011. She inherited a house from him, which she promptly gave to her son. However, no one thought to mention that to us until she had a question this year about the interest deduction. I have advised her that she needs to file the return, even if it is late, and I have prepared the return. But she has asked how much the penalty will be for filing it a year late, and I have never had that situation and don't know.

No tax is due, since this is well under her unified credit amount, but some penalties are not related to percentage of tax due. Any body know?

[KEYWEST_RICKS]

I had the same issue about 3 years ago. They have not received any penalty notice on the return at this time.

[michaelmars]

did she gift it to her son or did she disclaim her inheritance and let it pass to a secondary bene ie the son? Was it ever titled into her name?

[jainen]

>>some penalties are not related to percentage of tax due<<

This one is. According to Instructions for Form 709, penalties are assessed under Section 6651. That's the same as Form 1040, so it's 5% per month (25% max) of tax due, in addition to late payment penalties and interest if any. Unfortunately there is a $135 minimum after 60 days, unless due to reasonable cause and not willful neglect.

[Gail in Virginia]

did she gift it to her son or did she disclaim her inheritance and let it pass to a secondary bene ie the son? Was it ever titled into her name?

She gifted it to her son. It was not her husbands son, so I don't think declaiming in favor would work. Nice thought, though. Thanks for the answers.

[ari]

• do you have to file a timely return to use the unified credit?