This IRM will provide guidance on collection issues that are unique to gift tax and generation-skipping transfer tax collection cases including methods to locate assets, case analysis, and collection against assets.

The authority to collect tax on a tax assessment is addressed in IRC 6502, Collection after assessment. Collection principles are described in IRM 1.2.1.6.2, Policy Statement 5-2, Collecting Principles. IRM 1.2.1.6.1 explains why enforcement is a necessary component to move the taxpayer towards compliance with their tax obligations and to promote a system of voluntary compliance. Delegation orders for various collection activities are addressed in IRM 1.2.2, Servicewide Delegations of Authority.

IRM 1.2.65.3, SB/SE Functional Delegation Orders - Collection, provides delegation orders that are specific to the Small Business/Self Employed Collection organization.

Internal Revenue Code and Treasury Regulations related to this section include the following:

These procedures apply to Field Collection revenue officers who are responsible for investigating and collecting on the following returns:

Director, Field Collection, is the executive responsible for all Field Collection programs.

Director, Collection Policy, is the executive responsible for the policies and procedures followed by Field Collection employees.

Field Collection area directors, territory managers, and group managers are responsible for ensuring Field Collection personnel comply with these procedures.

Field Collection revenue officers are responsible for following the procedures in this IRM.

Field Collection Civil Enforcement Advice and Support Operations (CEASO) Advisory employees and Counsel may provide advice and may review some of the Field Collection revenue officer collection activity described in this IRM. CEASO Property Appraisal and Liquidation Specialists (PALS) may take actions on these cases.

IRM 1.4.50, Resource Guide for Managers, Collection Group Manager, Territory Manager and Area Director Operational Aid, contains responsibilities of managers in Field Collection case work.

IRM 1.4.53, Resource Guide for Managers, Advisory and Property Appraisal and Liquidation Specialist Group Manager Operational Aid, contains responsibilities of Civil Enforcement Advice and Support Operations (CEASO) group managers.

Operational and program reviews are conducted to ensure that program delivery and case actions are in accordance with administrative requirements. National quality and consistency reviews are conducted to ensure program consistency and effectiveness in case processing. See IRM 5.13.1, Embedded Quality Collection Field Organizations Administrative Guidelines.

Integrated Collection System (ICS) is used to control gift tax and generation-skipping transfer tax collection and delinquent return accounts assigned to Field Collection and to document case work.

The ENTITY Case Management System can generate reports to assist in managing assigned inventory.

Throughout this IRM, references to "IRC 6321 assessment lien" should be interpreted as the statutory federal tax lien that arises under IRC 6321, Lien for taxes.

The following table includes common acronyms used in gift tax and generation-skipping transfer tax cases:

Common terms used in gift tax cases include the following:

Related resources include the following:

Gift tax is assessed as follows on Integrated Data Retrieval System (IDRS):

If there is a TC 420, Examination Indicator, on IDRS that has not been reversed by a TC 421, the case may be assigned to an Estate and Gift (E&G) examiner to review or examine the return. Check IDRS command code (CC) AMDIS for possible case assignment information. If there is a case assignment number, check Knowledge Management Estate and Gift Contacts to locate the E&G Examination Group that is assigned to the case. If there is no case assignment, the return may, or may not, get assigned to E&G Examination in the future. Some common codes seen on CC AMDIS on gift tax cases include the following:

The method a donor must use to request an extension of time to file a Form 709 gift tax return depends on whether the donor is also requesting an extension of time to file their Form 1040, U.S. Individual Income Tax Return. An extension of time to file does not extend the time to pay the tax. See IRM 5.5.9.3.3, Extensions of Time to Pay Gift Tax.

Any extension of time to file Form 1040, U.S. Individual Income Tax Return, will also automatically extend the time to file a gift tax return for the same year. Income tax extensions are requested on Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, or Form 2350, Application for Extension of Time to File U.S. Income Tax Return. U.S. citizens and resident aliens abroad who expect to qualify for special tax treatment file Form 2350. A donor may only use Form 4868 or Form 2350 to request an extension of time to file a gift tax return if they are also requesting an extension of time to file their income tax return. Donors that file Form 4868 or Form 2350 that also need to make a payment with their extension of time to file request should use Form 8892-V, Payment Voucher, included with Form 8892 to remit their payment.

If a donor is not requesting an extension of time to file their income tax return, they can request an extension of time to file a gift tax return by submitting Form 8892, Application for Automatic Extension of Time to File Form 709 and/or Payment of Gift/Generation-Skipping Transfer Tax. These donors should make gift tax payments by using the Form 8892-V payment voucher attached to Form 8892.

A Transaction Code (TC) 460 on Integrated Data Retrieval System (IDRS) indicates that a taxpayer received an extension of time to file and the date that the extension of time to file will expire. The failure to file penalty is not assessed while an extension of time to file is in effect.

A donor may request an extension of time to pay gift tax by submitting Form 1127, Application for Extension of Time for Payment of Tax Due to Undue Hardship.

The time that the extension of time to pay gift tax can be extended to depends on whether the tax is from an original assessment, or if it is the result of a tax deficiency assessment.

On an original tax assessment, the IRS may extend the time for payment of gift tax reported on Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, for a reasonable period not to exceed six months from the date the payment is due. In some cases, the extension may exceed six months if the taxpayer is out of the country.

The amount due as the result of a gift tax deficiency assessment may be extended for a reasonable amount of time not to exceed 18 months from the date payment of the deficiency is due, and in exceptional circumstances, for an additional 12 months.

An extension of time to pay may only be granted when it is shown that payment of the tax will result in an undue hardship to the donor.

Form 1127 extensions of time to pay gift tax requests are processed by Campus Estate & Gift. Form 1127 is then forwarded to Advisory to approve or disapprove the request.

When Advisory receives a request for an extension of time to pay gift tax, they will open a Non-Field Other Investigation (NFOI) on Integrated Collection System (ICS), and they will document their case history with their determination. Revenue officers can check the ICS history for information regarding any prior extension of time to pay requests, and they can contact Advisory for their case file for any related taxpayer correspondence.

If Advisory approves an extension of time to pay gift tax, they will request input of a Transaction Code (TC) 470 (no closing code) on Integrated Data Retrieval System (IDRS) for the appropriate number of cycles and a TC 270 for $0.00. Campus Examination Estate & Gift will usually document the TXMOD history base with the new extension date by inputting F1127EXT PAYMTDUE MMDDYYYY.

Approval of an extension of time to pay does not relieve the taxpayer from liability for interest that accrues during the period of the extension. However, it does provide relief from the failure to pay penalty through the date the extension of time to pay was granted.

For more information on processing Form 1127, see IRM 5.1.12.26, Form 1127, Application for Extension to Pay Due to Financial Hardship, and IRM 5.5.5, Processing Estate and Gift Tax Extensions.

Obtain a copy of Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, to identify the donor (individual that gave the gift), donee (individual that received the gift), and for a description of the gift. If the IRS is currently examining the return, you may be able to secure a copy of the return from Estate & Gift (E&G) Examination with any potential examination changes. See IRM 5.5.9.3.1, Gift Tax Assessments, for more information on examination codes. See Knowledge Management Estate and Gift Examination Contacts to locate an E&G Examination Group. You can also request a copy of the return from the taxpayer.

For returns processed January 2020 or later, some gift tax returns may have been scanned, and digital copies may be available. See Knowledge Management Ordering Estate & Gift Tax Returns for the current procedure to follow to obtain a copy of a scanned gift tax return. The date associated with the TC 150 on Integrated Data Retrieval System (IDRS) can be reviewed to determine if a gift tax return was processed January 2020 or later.

If a digital copy of the return is not available, and you need to order a paper copy of Form 709 from IRS Files, complete a separate Form 2275, Records Request, Charge and Recharge, for each gift tax return that you need. Include the Document Locator Number (DLN) from Integrated Data Retrieval System (IDRS) Command Code (CC) TXMOD or BMFOL.

When completing Form 2275, provide all names and nicknames used by the taxpayer to assist Files with locating the return. Gift tax returns are stored by the Service Center number (indicated by the first two digits of the DLN) then in alphabetical order. Providing any variations of the taxpayer’s name and former names (such as a maiden name) will assist Files with locating the return. The taxpayer may be willing to provide any possible names in which gift tax returns could be filed. Any additional names can be added to the bottom of Form 2275. The signature on line ten may be digital. See Knowledge Management Ordering Estate & Gift Tax Returns for the fax number to send Form 2275 to request a gift tax return.

For gift tax returns processed before January 2020, when a gift tax examination was completed by E&G Examination or reviewed by IRS Independent Office of Appeals (Appeals), the examination papers will likely be with the paper gift tax return. For gift tax returns processed January 2020 or later, when a gift tax examination is completed by E&G Examination or reviewed by Appeals, the examination papers may be available electronically. You may need to try both methods to locate examination documents which may identify additional gifted assets.

If the gift tax was determined in Tax Court, IRS Counsel may have copies of gift tax returns, or you may be able to obtain these documents from the Clerk’s office associated with the Tax Court.

If you are looking for a complete historical record of gift tax returns filed, and the case is not under examination by E&G Examination, check IDRS CC BMFOL for recently filed gift tax returns. Since all historical data may not be reflected on BMFOL, also check CC MFTRAC to pull information under the taxpayer’s social security number on all filed returns to include ones that have fallen off the retention register. IRM 4.25.1.3.1, Obtaining Historical Gift Tax Returns (Form 709), has additional information to obtain historical gift tax returns.

When Form 706 or Form 706-NA estate tax return is filed, Files will pull all historic gift tax returns to associate with the estate tax return. In this case, order the Form 706 or Form 706-NA file to obtain copies of gift tax returns. See IRM 5.5.7.8, Ordering Estate Tax Returns, for information on how to request an estate tax return.

If you are assisting a taxpayer with obtaining copies of previously filed gift tax returns, refer them to the IRS website to search under "Frequently Asked Questions on Gift Taxes" where they will find procedures to follow.

See Knowledge Management Locations to Return F709, F706, and F706-NA for the location to send a gift tax return back to Service Center Files for storage.

Initial analysis involves examining the overall case to understand the issues involved and the necessary actions to move the case to a resolution.

For cases in which a gift tax return has been filed, review Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, for information to aid in your investigation. Form 709 will provide the following information:

The gifted assets are listed on Form 709, Schedule A, which contains three parts. If prepared correctly, Part 1 should list gifts for which there is no additional generation-skipping transfer tax liability. Parts 2 and 3 contain information on gifts that include additional generation-skipping transfer tax liabilities. Therefore, all gifts listed on Parts 1, 2, and 3 on Form 709, Schedule A, will need to be reviewed to identify the gifts and the recipient of the gifts (donees) during a tax year. Any generation-skipping transfer tax that is reported on Form 709 should be collected like gift tax. See IRM 5.5.9.4.2, Generation-Skipping Transfer Tax Reported on Gift Tax Returns.

If the gift tax account has been audited, the examination files and work papers should be reviewed to identify changes in the value of gifts received by each donee. Check Integrated Data Retrieval System (IDRS) command code (CC) AMDIS to determine the status of an examination. See IRM 5.5.9.3.1, Gift Tax Assessments, for commonly seen codes on IDRS CC AMDIS on gift tax accounts. Any examination papers should be with either the original Form 709 paper file or with the electronic file. See IRM 5.5.9.3.4, Ordering Gift Tax Returns, for procedures to request a Form 709 file.

The following sections in the Internal Revenue Code address liens that can be used to collect on unpaid gift tax accounts:

The liens that arise under IRC 6321 and IRC 6324(b) are cumulative. The IRS has the right to use either of these liens to collect a gift tax liability. When collecting on a gift tax account, administrative seizures and judicial actions should be coordinated through the local Civil Enforcement Advice and Support Operations (CEASO) office just like in any other collection case.

The person who makes a gift is known as the donor. This individual has the primary responsibility for paying the gift tax and any penalties and interest on the gift tax. See IRC 2502(c), Tax to be paid by donor. The gift tax liability is assessed under the donor’s social security number. See IRM 5.5.9.3.1, Gift Tax Assessments, for more information on how gift tax is assessed.

If the donor dies before paying the gift tax liability, the donor’s estate will become liable for paying the gift tax debt. See 26 CFR 25.2502-2, Donor primarily liable for tax.

The IRC 6321 assessment lien attaches to the donor’s assets, and it may be used for collection through seizure, levy, and judicial action on the donor’s property to collect any gift taxes assessed against the donor. See IRM 5.5.9.3.6.1, IRC 6321 Assessment Lien on Gift Tax Liabilities. The collection statute expiration date (CSED) is ten years from the date of the assessment, plus any extensions or suspensions provided by law.

There are two aspects to IRC 6324(b), Lien for Gift Tax:

When the donor (individual that gave the gift) fails to pay the gift tax owed, IRC 6324(b) makes the donee (recipient of the gift) personally liable for the unpaid gift tax.

The donee’s liability is not limited to the gift tax owed on the specific gift that the donee received. When gifts have been received by multiple donees within a given year, each donee is personally liable for the entire gift tax debt (including penalties and interest) arising out of the year of the gift. This personal liability is for up to the value of the gift received by that donee, or the remaining tax liability, whichever is less, even when the remaining tax due is attributable to gifts received by another donee. See La Fortune v. Commissioner, 263 F.2d 186 (10th Cir. 1958).

The donee liability can also be asserted on gifts that did not generate any part of the gift tax liability because they were subject to the annual exclusion or were subject to the marital deduction, charitable deduction, or unified credit. However, caution should be used when collecting unpaid gift tax from charities.

The donee’s liability may include penalties and interest assessed against the donor if the tax, penalties, and interest still fall within the value of the gift received by the donee during the year that the gift tax is due.

When a gift has been made to a trust, donee liability may be asserted against beneficiaries of the trust. Generally, the law treats a gift to a trust as a gift to the beneficiaries of the trust who held a present interest rather than a gift to the trustee or to the trust itself. Because these cases are often fact dependent, consult with Counsel before asserting donee liability against the beneficiary of a trust.

The donee (recipient of the gift) liability under IRC 6324(b) is a type of transferee liability. One of the following must occur before collection action can be taken under this personal liability provision. These administrative and judicial collection tools against the donee are available in addition to collection action based on the gift tax lien or gift tax "like lien." See IRM 5.5.9.3.6.2, IRC 6324(b) Gift Tax Lien and Like Lien:

If the donee (recipient of the gift) transferred the gifted asset to another individual, except for a sale of the asset for fair market value, an IRC 6901 administrative transferee assessment or a suit to establish a transferee liability can also be made against the individual that received the asset from the donee as a subsequent transferee.

The following is the assessment statute for an IRC 6901 administrative transferee assessment against a donee (recipient of the gift) and against subsequent transferees:

After an IRC 6901 administrative transferee assessment is made against the donee (recipient of the gift) or subsequent transferee, notice and demand is provided, and there is a neglect or refusal to pay, an IRC 6321 lien is created which attaches to all of the donee or subsequent transferee’s assets. A Notice of Federal Tax Lien may be filed on this separate assessment against the donee or subsequent transferee. The separate transferee assessment against the donee or subsequent transferee will have its own collection statute expiration date (CSED) based on the assessment date of the tax.

Alternatively, a suit to establish a transferee liability against the donee or subsequent transferee may be filed. The statute of limitations for the United States to assert personal liability through a suit to establish a transferee liability against a donee (recipient of the gift) or against a subsequent transferee is the same as the period for collection against the donor (individual that gave the gift). It runs for ten years from the date of assessment, or it may run longer if an event occurred to extend or suspend the collection statute. Therefore, a suit to establish a transferee liability may be filed against the donee or subsequent transferee through the collection statute expiration date. See United Sates v. Botefuhr, 309 F.3d 1263 (10th Cir. 2002).

These collection alternatives against the donee (recipient of the gift) and subsequent transferees of a donee are separate from the government’s right to collect against the assets owned by the donor (individual that gave the gift) using the IRC 6321 assessment lien. The government is not required to pursue the donor before attempting to collect the unpaid tax from a donee or subsequent transferee. The government is not required to pursue the donee or a subsequent transferee in any particular order or to pursue all the donees or transferees. Transferee liability is independent of the gift tax lien and may be pursued by the government without first pursuing the gifted asset.

Referrals for an IRC 6901 transferee assessment or for a suit to establish a transferee liability against the donee (recipient of the gift) or against subsequent transferees should include information regarding the liability and collectibility on all donees and any subsequent transferees.

For additional information, see IRM 5.1.14.2, Transferee Liability and Fraudulent Conveyances, IRM 5.17.14, Fraudulent Transfers and Transferee and Other Third Party Liability, IRM 5.17.12.11, Fraudulent Transfers and Transferee and Other Third Party Liability, and IRM 25.3.2, Suits by the United States.

The following is a summary of available collection tools to collect on a gift tax liability:

A Field Collection employee may receive a delinquent return investigation to secure an unfiled Form 709, United States Gift (and Generation-Skipping) Tax Return. This may result from an expired extension of time to file. A Field Collection employee may also become aware of an unfiled gift tax return while working an investigation on a related case such as an income tax liability of a taxpayer that gave a gift that was not properly reported to the IRS. If additional information is needed to determine if a gift tax return should be filed, a summons may be issued. See IRM 5.5.9.3.11, Issuing a Summons for Gift Tax Information.

The following actions may also be taken:

Once Field Collection gathers sufficient documentation to support the filing requirement for the tax year in question (see Form 709 instructions for filing requirements for the applicable tax year), Field Collection can submit a referral to Estate & Gift Examination through the Specialist Referral System (SRS) if the donor does not voluntarily file the return. Estate and Gift Examination will determine if a substitute for return should be prepared.

Form 2039, Summons, is the general, all-purpose summons form to issue for any first-party or third-party summonses. Issue Form 2039 to the donor (individual that gave the gift) or to the donee (recipient of the gift) for testimony, books, and records. Form 2039 and Form 6639, Financial Records Summons, can be used when summoning third parties, such as accountants, title companies, banks, and investment companies.

For procedural guidance on issuing a summons, refer to IRM 25.5.5, Summons for Taxpayer Records and Testimony, IRM 25.5.6, Summonses on Third-Party Witnesses, and IRM 5.17.6, Legal Reference Guide for Revenue Officers, Summonses.

In cases in which a Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, has not been filed, the following is an example of wording that may be used to summons for information so that a return may be prepared:

If a taxpayer submits a request for abatement of penalties on a gift tax return, check the account to determine if it is under examination by Estate & Gift (E&G) Examination. If the return is currently under examination, send the request to the assigned examiner to review the request. See Knowledge Management Estate and Gift Examination Contacts.

If the return was examined, and the examination is now closed, documentation with the return may show why penalties were assessed, or it may show a prior penalty abatement request that was already addressed through the date of examination by E&G Examination, Campus E&G, IRS Independent Office of Appeals, or Tax Court. There may also be an indication of a prior request in the Integrated Data Retrieval System (IDRS) Command Code (CC) TXMOD history. Documents addressing penalties should be attached to Form 709, United States Gift (and Generation-Skipping) Tax Return, paper file or with the electronic file. See IRM 5.5.9.3.4, Ordering Gift Tax Returns, to obtain a copy of Form 709.

Do not abate a penalty determined by Tax Court. IRC 6512(a) bars taxpayers from obtaining a subsequent administrative abatement, refund claim, or refund suit regarding a penalty that was determined by Tax Court.

Address any penalty abatement requests that have not already been considered by the IRS or in Tax Court. If the penalty abatement request is due to an IRS error, determine if the penalty was assessed in accordance with IRM and IRC guidance. If the request for abatement is based on reasonable cause, follow the procedures in IRM 20.1.1.3, Criteria for Relief from Penalties, to determine if the reasonable cause criteria has been met. Also see IRM 5.1.15.16, Penalty and Interest Abatements.

If an abatement is warranted, prepare Form 3870, Request for Adjustment, and fax your request to Campus E&G to fax number (855) 386-5127 or (855) 386-5128. Include the taxpayer request for abatement letter with Form 3870. Penalty abatements on gift tax cases cannot be requested through the Reasonable Cause Assistant (RCA) program because of the "V" or "W" that follows the taxpayer identification number.

If a penalty abatement request is denied, notify the taxpayer in writing. See IRM 20.1.1.3.5.3, Taxpayer Not Entitled to Relief. If the taxpayer files an appeal, date stamp the protest and document in the case file history that the protest was received. Forward the protest letter to IRS Independent Office of Appeals within 30 days from the postmark date of the protest letter. Also include the following:

Route the penalty denial protest to the IRS Independent Office of Appeals. The routing information is on the IRS Independent Office of Appeals Case Routing website.

During your investigation, a taxpayer may indicate an intention to file an amended gift tax return, or an adjustment may be needed on the account.

If an amended gift tax return is received, and the original return is under review by Estate and Gift Examination, forward the amended return to the examination employee for their consideration.

If an adjustment is needed on the account, and the case is under review by E&G Examination, ask the assigned E&G examiner if the adjustment document should be sent to the examining employee or to Campus E&G.

If an amended return is received or an adjustment is needed on a gift tax account, and the case is not assigned to an E&G Examination employee, fax the documents to Campus E&G at fax number (855) 386-5127 or (855) 386-5128. IRM 10.10.1.3.1.1, Acceptable Forms of Electronic Signatures, allows for taxpayer submission of these requests to be sent with images of handwritten signatures. Documents can also be sent to the following address:

Use caution if issuing Letter 4222, Field Collection Case Resolution, to notify a taxpayer of a resolved account. Be sure that there are no pending gift tax or other type of tax examination assessments that could create an additional tax liability.

Schedule R, Generation-Skipping Transfer Tax, is an attachment to Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return or Form 706-NA, United States Estate (and Generation-Skipping Transfer) Tax Return Estate of nonresident not a citizen of the United States. It is used to report the generation-skipping transfer (GST) tax that is payable by the estate for any direct skip transfer (property passes directly to the generation two or more levels below the transferor) of assets that occurred at the date of the decedent’s death.

Some key elements to this tax include the following:

Generation-skipping transfer (GST) tax may be reported on Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, when it is also part of a gift tax liability. This would occur if the tax was due to a direct gift by the donor to grandchildren or other individuals two or more generations below the donor.

Some key elements to this tax include the following:

Generation-skipping transfer (GST) tax may be owed on a separate Form 706-GS (D), Generation-Skipping Transfer Tax Return for Distributions, when the tax is owed due to a distribution to a beneficiary. Form 706-GS (D) is filed to report and pay on some taxable distributions from a trust to a beneficiary.

Some key elements to this tax include the following:

This tax arises from Form 706-GS (T), Generation-Skipping Transfer Tax Return for Terminations. This form is used to report and pay generation-skipping transfer (GST) tax owed due to a taxable termination of a trust.

Some key elements to this tax include the following: