If your estate plan calls for making noncash gifts in trust or outright to beneficiaries, you need to know the values of those gifts and disclose them to the IRS on a gift tax return. For substantial gifts of noncash assets other than marketable securities, it’s a good idea to have a qualified appraiser value the gifts at the time of the transfer.
Adequately Disclosing a Gift
A three-year statute of limitations applies during which the IRS can challenge the value you report on your gift tax return. The three-year term doesn’t begin until your gift is “adequately disclosed.” This means you can’t just file a gift tax return, but also:
- Give a detailed description of the nature of the gift,
- Explain the relationship of the parties to the transaction, and
- Detail the basis for the valuation.