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US Court Rules That Donors Health Problems Were Not Severe Enough to Warrant Reasonable Cause for Failure to File a Gift Tax Return

Failure to File Gift Tax Return 

The US Court of Federal Claims ruled that a donor’s health problems were not severe enough to warrant reasonable cause for failure to file a gift tax return.  In this case the donor failed to file a gift tax return for gifts made to her two daughters.  The donor had multiple health issues including a knee replacement, pneumonia, upper respiratory infections, a thyroid growth, heart palpitations, and a cataract surgery.  The donor subsequently failed to file the mandatory gift tax return by the proper deadline.

The IRS’s position was that none of these afflictions taken alone or all together resulted in a debilitating condition.  The US Court of Federal Claims ruled for the IRS stating that there was no evidence that the donor was continuously incapacitated and her ailments did not escalate into a debilitating crisis.  Furthermore, the donor’s attorney called her a month before the due date to remind her of the deadline.  Additionally, the donor attended numerous events and filed multiple forms, more difficult than a gift tax return.  The court’s conclusion was that the late filing penalty was properly applied in this case.

Editor’s Comment

This case is important because it illustrated that although a donor may have multiple health issues, quantity does not necessarily add up to a crisis or debilitating illness.  Obviously, it is best to file forms on time.  If a taxpayer or donor cannot file the forms on time, there are extensions available and the IRS expects the taxpaying public to use these.

By: Basi & Basi at the Center for Financial, Legal and Tax Planning for Transworld M&A Advisors