- quote -

Going back, this was what I saw as the beginning of this
inquiry:

- quote -

How is that an income tax issue?

Stu

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- quote -

This subthread was about the income tax returns.

Seth

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- quote -

I'm not aware that a gift tax return can be filed jointly.
A gift can be split, certainly, but that is when a gift is
from one spouse but treated as coming from both for tax
purposes.

Stu

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D. Stussy wrote:
- quote -

Of course. But a year can be closed for income tax purposes
but still open for gift tax purposes.

Stu

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- quote -

If they filed jointly, how does that map to "no return was
filed"?

Seth

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- quote -

So, I conclude that the safest thing for a couple to do if
they THINK they're headed for anullment is to go ahead and
file a 709, reporting the interspousal gift and claiming the
marital exclusion, and hope that by the time the anullment
goes through, the gift tax ASED has expired... :-)
Hmmmm.

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Stuart Bronstein wrote:
- quote -

It's not just a gift tax return that would need to be dealt
with - but INCOME TAX also.... People REGULARLY file those.

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Arthur Kamlet wrote:
- quote -

Balance due amended returns are also rejected. The ASED for
the IRS has passed so they can't process (supplementally
assess) them.

Citation: IRC 6204(a).

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- quote -

A closed year can't be amended. I should have stated that
they would have to amend all years for which the statute is
sill open.

The original issue was whether a taxable gift occurred where
one spouse gave another a gift and the marraige was later
annulled. In that case, no gift tax return would have been
filed (or if one had been filed, presumably it would not
have reported the gift to the annulled spouse) so the
statute would have never run on the spousal transfer. Thus
every year prior to the annulment would presumably still be
open for gift tax purposes, regardless of how far back it
occurred.

Brian Bivona, CPA

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D. Stussy <kd6lvw[at]kd6lvw.ampr.org> wrote:
- quote -

Cite please?

I'll grant that any refund which might result from amending
a closed year is forfeited.

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

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"Seth Breidbart" <sethb[at]panix.com> wrote:
- quote -

are you speaking of a civil annulment as opposed to a
catholic church annulment?

--
jtc


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Seth Breidbart wrote:
- quote -

If no return was filed, the limitations period does not run
and there is no restriction on going back.

Stu

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D. Stussy wrote:
- quote -

People seldom file gift tax returns. Unless they actually
file a return, the year is not closed for this purpose.

Stu

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Brian wrote:
- quote -

I haven't actually read that ruling, but it would be
interesting to see how it addresses any closed (including
compromised) years. An annulment does not imply tax fraud,
since when filed, the returns were [presumedly] of a correct
filing status, etc.... Closed years can't be amended.

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Brian <bpbiv[at]yahoo.com> wrote:

- quote -

Including those years for which filing amended returns would
otherwise be barred by the passage of time?

Seth

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William Brenner wrote:

- quote -

Since an anullment is a reversal of the marriage as if it
never happened, I would say that this created a reportable
and/or taxable gift out of one that originally wasn't. A
divorce would cause a different answer.

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"William Brenner" <wjbjr[at]webtv.net> wrote

...
- quote -

In Rev Rul 76-255 the IRS takes the position that if a
court holds that under state law no valid marriage ever
existed the couple must file amended returns for all years
they filed jointly. I don't know of a case in the gift tax
area, but the same logic should apply. With the income tax
the taxpayers filed jointly because they assumed that they
were married. The annulment under state law
retroactively disqualified them from filing jointly.

Gift tax issues usually also look to state law for the
legal effects that determine their federal tax consequences.
If the IRS' position is that the couples are retroactively
unmarried for income tax purposes and must file as single
persons, presumably they would also take the postion that
the taxpayers are retroactively unmarried for the unlimited
marital gift exclusion. This potentially could result in a
nasty unintended and unforseeable taxable gift.

Brian Bivona, CPA

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wjbjr[at]webtv.net (William Brenner) wrote:

- quote -

Apparently Rev. Rul. 76-255 still controls, and this seems
to require that the tax effects of an annulled marriage be
unwound. The details of the annulment, the way the state
views an annulled marriage, and what can be discerned about
the parties' intent will probably help to clarify any real
situation in which something like this happened to occur.

An annulment that declares the marriage legally void from
the beginning is the interesting kind of annulment. Others,
such as the annulment that substitutes for divorce among
Roman Catholics, may not be distinguishable from a divorce.

The closer the annulment is in time to the gift, the more
likely an unwinding would be required: if the annulment
became final in the same year or the next, there's no
impracticality in converting the gift from nonreportable to
reportable.

The more the situation smells of sham, the more likely the
IRS would be interested, and the more likely an unwinding
would be required. If it looked like a paper marriage for
the purpose of transferring, say, a business between
families, the transaction is unlikely to survive. But if it
looked like a good-faith marriage involving the sort of
people who are accustomed to making gifts of that magnitude,
and it foundered for a reason properly dealt with through
annulment, it stands a better chance of standing up.

--
Chris Green

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William Brenner wrote:

- quote -

Well, I don't do theoreticals for most people, but I'll make
an exception for you. ;-)

- quote -

Right. There's a 100% exemption for intervivos gifts to
spouses.

- quote -

Interesting question. If they got divorced it shouldn't
change anything. But with an annulment it's basically
saying they were never married. So I suppose it could be
retroactively taxable.

One of my friends once represented a woman who married a
foreign guy, but his intention was just to get his green
card and then get divorced. When he filed for divorce, she
counter claimed for annulment based on fraud. Once the
annulment was entered, the INS had the guy expelled from the
US.

Stu

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William Brenner wrote:

- quote -

Hmmm... That's an interesting question. My ~guess~ would be
that a gift tax return is now required (assuming that the
"gift" is not returned).

As I recall, when an annulment occurs, any "joint" returns
that were filed during the term of the marriage must be
amended to reflect a non-married status. The theory, as you
note, is that the marriage NEVER HAPPENED. Thus, I would
think that a gift tax filing would be triggered in the
situation you described.

But, alas, I'm not on the Supreme Court... <g
MTW

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