Taxable gifts made during life reduce the amount the decedent may leave tax-free at death. Taxable gifts are gifts in excess of the $10,000 gift tax exclusion (See Chapter Nine “Gifting”). Form 709 must be filed for any year a taxable gift is made.

Taxable gifts for which no Form 709 was filed should be documented after death. As personal representative, you must prepare and sign Form 709. Significant tax savings may be available where you and your late spouse made lifetime gifts but failed to Form file 709. You may “split” the gift on Form 709, and essentially double your gift tax exclusion.

Form 709 is due on April 15th following the year in which the gift is made. A six-month extension is permitted. Post mortem gift tax returns must be filed by April 15th of the year following the year of death or the due date of Form 706 whichever is earlier. The minimum penalty for failing to file a 709 is $100, even if no tax is due.

Generally, gift tax returns should be filed on a timely basis in order to start the running of the statute of limitations. The IRS has only three years from the date of filing Form 709 to audit the return. By contrast, there is no limit on the time the IRS can audit gifts where no Form 709 was filed. Carefully documenting gifts limits the IRS’s ability to scrutinize gifts years later, even after the death of the donor.

The following is an example of page one of Form 709: