Update on “Formula Gifting”

formula giftingFor taxpayers who make gifts this year, we have been strongly recommending they consider using the “formula gifting” mechanism. The formula gifting mechanism can be used to avoid any increase in the  amount of gift tax in the event the value of the gift is challenged by the Internal Revenue Service.

This gifting process is based on the Tax Court’s Wandry v. Commissioner, T.C. Memo. 2012-88 (2012) case. Recently the IRS withdrew their appeal of the Wandry case in the 10th Circuit Court of Appeals and the case was dismissed.

While this apparent victory is good news for the taxpayers, many estate and gift tax planners were hoping the case would be tried to further solidify the validity of the formula gifting technique. We continue to believe that formula gifting is an important tool to consider for gifts when the value of the gift could be questioned by the IRS.

What will happen in the gift and estate area of taxation after 2012 is unknown. The lifetime exemption and many tools may change significantly at the end of this year.

Gifting is one of the key topics we cover at our free year-end tax seminars. You can learn more by visiting our website at www.gggcpas.com. If you have immediate questions on gifting or any other tax situation please call our Tax Department at (781) 407-0300.

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