Accurate Gift Tax Returns Can Literally Stop the Clock (on the IRS)


In 1972, President Richard Nixon cruised to re-election. “The Waltons” premiered on CBS. And Sumner Redstone, who wasn’t yet a global media mogul, (allegedly) made a taxable gift to his children and failed to file a return.

Why wouldn’t you file a gift tax return if you made a taxable gift? Well, for a lot of people, the answer might be “I didn’t know it was required.” But, in this case, Redstone argues the transfer wasn’t gift, but rather the result of an “intra-family lawsuit” and thus “an ordinary business transaction.”

So, how long does (or can) the IRS scour your financial history to find taxable gifts? Well, it seems they do (or can) go back some 41 years. Whether you are a billionaire or a regular “Joe,” this case is worth watching.

You can get the high points of the case from a recent Bloomberg article titled “Billionaire Redstone Challenges IRS on Tax for 1972 Gift.” Normally the IRS is bound by a statute of limitations set to about three years. However, an exception to this rule includes the failure to file a tax return like the allegedly missing gift tax return of Mr. Redstone.

Apparently, the difficulty arose over certain shares of National Amusements Inc., and a family lawsuit resulting in a “transfer” of shares. The IRS is now calling that “transfer” a “gift” with $1.1 million in taxes, penalties, and interest due and owing.

According to Richard Behrendt, a former estate and gift tax auditor turned director of estate planning, “This is unheard of… I can’t remember ever hearing of anybody going back 41 years to raise an issue. It’s really unprecedented in my experience.”

Note: Mr. Redstone may have become a target, given the fact he is the chairman of both Viacom and CBS, not to mention National Amusements and all the related subsidiaries of the three. Reportedly, Mr. Redstone is worth approximately $4.9 billion. Nevertheless, this 41-year-look-back is a troublesome precedent.

The take-away (even if you have a smaller fortune) is that timely filing of an accurate gift tax return will start the clock running on a three-year statute of limitations. If no gift tax return is filed, the statute does not apply. Thus, if a taxpayer fails to file a gift tax return, the IRS can pursue you indefinitely.

To speak with an estate planning attorney, visit

Reference: Bloomberg (May 1, 2013) “Billionaire Redstone Challenges IRS on Tax for 1972 Gift

Categories: Uncategorized