Western U.S. Estate Tax Returns 50% Higher Than IRS Projections

At a California Tax Bar Conference on November 2, 2007, IRS Territory Manager for estate and gift taxes in the western United States, Charles Morris, noted that a much higher than anticipated number of estate tax returns are being filed. The IRS had anticipated approximately 33,000 returns would be filed in 2007. It now appears likely that about 50,000 estate tax returns (a 50% increase) will be filed.

The increase in filings occurs in the same year in which the IRS has substantially reduced the number of estate tax attorneys and other staff. As a result, the IRS is necessarily going to focus on specific areas that involve potential compliance issues.

The areas for compliance focus are the following:
  1. The family limited partnership and discounts for lack of marketability and minority interest.
  1. Sec. 2036(a)(1) retained control or enjoyment of transferred assets - Mr. Morris notes that the IRS has won "decision after decision" in that area.
  1. Valuation - partial interests in real estate continue to be a contentious area.
  1. New Sec. 6695A appraiser penalties - the substantial appraiser penalties will be assessed in 2008. Mr. Morris reminded tax advisors that there is no statute of limitations on the appraiser penalty.
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find a probate attorney - July 1, 2008 8:23 AM

The whole appraisal issue is a nightmare... in a declining and illiquid market fair market value is a fantasy. Virtually all appraisals can be questioned.

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