Gift Tax Returns and 2010 – Checklist

Checklist – Filing 2010 Gift Tax Return Considerations

The 2010 year was extremely complicated from a planning
perspective. Gift, estate, and GST issues abounded. The law vacillated from one
extreme to the other before the TRA was enacted. Client gift tax returns for
the 2010 year will have to be approached with far more caution and focus than
in prior years. The following checklist indicates a few of the many steps to
consider.

√ Protective GST automatic allocation elections
should be considered. File an affirmative election for the 2010 year allocating
GST exemption rather than relying on the automatic allocation rules. In 2013,
the automatic allocation rules might again be in jeopardy.

√ In light of the 2010 repeal of the GST automatic
allocation rules and the possibility of a repeat performance in 2013, file a
list of all prior years automatic allocations, and affirmatively state the
intent was that they be respected in all future years, even if the automatic
allocations rules are again in issue. Reconfirming on a gift tax return, filing
all prior year automatic GST allocations, and stating that they are being
affirmatively reported in light of the uncertainty of future treatment of past
automatic allocations may accomplish little, but it would seemingly not cause
any harm. It might just help reconfirm the client’s position that past automatic
allocations were made, if 2013 brings the uncertainty 2011 brought.

√ Carefully and specifically elect rules for transfers to trusts for grandchildren out of the GST
automatic allocation that relied on the move down rule and were attended to avoid GST tax without the use
of GST exemption.

√ Evaluate the reporting of insurance trust funding
transactions. Some clients loaned funds to insurance trusts to fund 2010 gifts
in the absence of certainty about GST. Post TRA, these same clients may have
forgiven loans, or made gifts to those trusts and had the trusts repay the
loans. Be sure annual demand or Crummey powers were properly completed since
they may not fully be patterned after prior years. If a loan was made, obtain a
copy of the loan documents and repayment. Consider reporting the entire
transaction for gift tax purposes.

√ Some clients established trusts in 2010 before it
was certain whether GST could be allocated to those trusts, or whether they
could be GST exempt. Evaluate what actions and reporting may have to be
addressed and reflected on the 2010 gift tax return.

√ Valuation reports should be evaluated in light of
the swings. Some appraisers incorporated valuation impact of the relative
changes in anticipated future marginal tax rates in their analysis. With the
certainty (well for two years) of the TRA on income tax rates, the assumptions
in some of these appraisals may change.