The California tax agency has refused to honor the IRS request to turn over its database of all residents from 2005 to 2010 who transferred real estate to relatives for little or no compensation. The IRS suspects that as many as 90% of such individuals fail to file
gift tax returns with the federal government, prompting the agency to go on the hunt for these dodgers.
If the IRS wins its court case, “the sweeping request could expose many Californians—especially those who didn’t file federal gift tax returns—to audits as well as penalties or even substantial back taxes,” writes William Barrett in Forbes.
The IRS has sought the same tax records from 15 other states. A sample of gift tax returns in Ohio found 0% of those who had transferred property were compliant with IRS regulations. In Florida and Virginia, the rate was only 10%.
-Noel Brinkerhoff
In the Matter of the Tax Liabilities of Does (Leagle.com)