Tax Attic

Jerry Coon

Jerry Coon

The World of Outlaws (WOO) Sprint Car circuit comes to Michigan once a year. It seems like they spend at least half of their year in the neighboring states of Indiana, Ohio, and Pennsylvania but Michigan racing fans get one chance to see the big hitters like Steve Kinser, Sammy Swindell, and Donny Schatz, without travelling out-of-state, when they visit I-96 Speedway in Lake Odessa/Clarksville. I’m not sure who at I-96 has the pull to get the WOO dirt-track dare-devils to come to Michigan but I’m glad they are successful at doing what they do. The annual visit happened last Saturday night. The early weather reports were terrible with upwards of 90% chance of rain. One of the oddities of sprint car racing is that even though they are racing on dirt, even small amounts of rain will make the track as slick as glass. Since the tires are as smooth as a baby’s behind, “slick as glass” only results in spin-outs and wrecks and with rain in the forecast, it didn’t look good. However, as the day went on, the chances of rain seemed to diminish. I waited as long as I dared before leaving for the track. It was still only partly cloudy when I arrived as the qualifying began. Talk about perfect timing. Just as I set down, Paul McMahon set a new track speed record by averaging just over 120 miles per hour. Two other drivers also broke the 120 mph speed mark. If the rain held off, it was going to be a fast night of racing.

Since I was a late arrival, I ended up sitting low in the bleachers on the front stretch-third row from the bottom. As the cars passed, you can feel the 800 horsepower rumble from your toes right up through your fingers. Unfortunately, that’s not the only thing you felt as they passed by. You were also getting pelted by dust, chunks of dirt, and even some small rocks. Only rain could mess it up and it was getting more rainy-looking as the night wore on. The fellow sitting next to me had a smart-phone and called up WZZM’s weather. Just as we looked at the green on the radar, the track announcer said rainy weather was closing in but they would do all they could to get the feature race finished before the rain hit. They were good to their word. McMahon passed Schatz with a few laps to go and won going away. As he was being interviewed with the checkered flag, the heavens started to open up. I beat it to my car and drove in a pretty steady rain all of the way home. It was messy sitting low but it was still worth the trip and that bruise on my leg will go away in a couple of days.

Last week, I discussed common questions concerning the filing of Form 709, Gift Tax Return. The Form 709 must be filed when gifts to any one person exceed the annual exclusion amount of $14,000. This is important because gifts exceeding the annual maximum reduce a taxpayer’s lifetime estate. For those dying in 2013, the gift tax maximum and the estate tax maximum is $5,250,000. Generally put, a person can pass on to his/her heirs a total of $5,250,000 in property before estate tax must be paid. Generally put, a person doesn’t have to wait until he/she dies to pass on the $5,250,000 to the heirs. Gifts in excess of the annual $14,000, however, reduce the $5,250,000 total. I don’t know the exact percentage of the population that would have an estate in excess of $5,250,000 but, without a doubt, it’s a rather small percentage. It’s important enough to re-iterate the statement: if a taxpayer makes a gift in excess of $14,000, a gift tax return must be filed and the excess will reduce the $5,250,000 total estate amount. However, as long as the cumulative excess gifts don’t exceed the total gift tax exclusion amount of $5,250,000, there would be no gift tax due. A return must be filed but no tax will be due. One of the compliance programs the Internal Revenue Service is running currently involves the non-filing of gift tax returns when real estate property is transferred from one generation to the next. In one of the examples in last week’s article, I had a taxpayer transfer a condominium to a child. The condo had a fair market value of $120,000 so a gift tax return should have been filed. The due date of the return is the same as our regular Form 1040, April 15. The gift tax return would identify the property, the donor, the donee, the donor’s cost basis of the property and the fair market value of the property at the time of the gift. The mechanics of the form would calculate the amount of tax on the gift but it would also give the donor a credit for the calculated amount of tax as long as the $5,250,000 excess gift amount was not exceeded. The IRS is inquiring into properties that were transferred without a gift tax return being filed because, without the return, how does the IRS know when the $5,250,000 mark is exceeded. For taxpayers making transfers of property, the rules say to file a gift tax return. If a property transfer has taken place, I would recommend contracting with an attorney or a tax professional to comply with these rules before potentially that dreaded letter from the IRS arrives asking for details of the property transfer. This is Jerry Coon signing off.

 

 

Jerry Coon is an Enrolled Agent and

a Registered Tax Return Preparer.

He owns Action Tax Service on

Northland Dr. in Rockford.

Contact Jerry through his website:

www.actiontaxservice.com

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