ACTEC Trust & Estate Talk

Episode: Gift Tax Returns: Planning, Ethics, and Best Practices
Date: November 18, 2025

Episode Overview

This episode explores the latest developments, nuanced best practices, and ethical considerations around U.S. gift tax return preparation. Host John Challis moderates a detailed conversation with ACTEC Fellows James Doherty and Emily Kemble, who tackle everything from new IRS forms for non-residents, the advent of e-filing, handling digital asset gifts, and navigating the crucial "adequate disclosure" rules that govern the statute of limitations for IRS review.

Key Discussion Points and Insights

1. New IRS Form for Nonresident Gift Reporting (Form 709-NA)

Speaker: Emily Kemble
Timestamp: [01:01]

• Introduction of Form 709-NA, specifically for nonresident noncitizens subject to U.S. gift and certain generation-skipping transfer (GST) taxes.
• Clarifies definitions:
  • A nonresident, noncitizen is someone who is “neither domiciled nor a citizen of the United States at the time the gift is made.”
  • Individuals with citizenship due solely to U.S. territories are not treated as U.S. citizens for these purposes.
• Key point: U.S. citizens or residents for any part of a year must use the standard Form 709 and not the new form.
• Notable Quote:
  “Someone who's considered a non-resident, not a citizen of the United States for these purposes is a person who is… neither domiciled nor a citizen of the United States at the time the gift is made.” – Emily Kemble [01:29]

2. E-Filing of Gift Tax Returns: A Significant Update

Speaker: James Doherty
Timestamp: [02:18]

• The IRS announced, effective July 14, 2025, that gift tax returns can now be e-filed through the MEF (Modernized E-File) system.
• E-filing provides faster proof of filing and removes the need to mail large paper files.
• Cautions:
  • Many software providers may not have e-filing capability for 2024 returns due to the late rollout.
  • Practitioners must be authorized IRS e-file providers; additional registration steps may be necessary.
• Practical tip: Check with your software provider and consider necessary steps for e-file authorization.
• Notable Quote:
  “E-filing certainly has its benefits from a practitioner's standpoint. I will appreciate not having to send large paper files... and provides proof of filing very quickly.” – James Doherty [02:55]

3. Gift Splitting: New Reporting Procedures

Speaker: Emily Kemble
Timestamp: [04:04]

• New procedure for split gifts (where spouses divide a gift’s value for tax purposes):
  • The consenting spouse no longer signs the same return.
  • Instead, must file a Notice of Consent, which affirms the election to split gifts.
  • If both spouses are required to file, returns (with each Notice of Consent) must be submitted together.
• The election must happen on the first gift tax return filed for the year by either spouse.
• Notable Moment: The change streamlines spousal reporting and consent from "signing" to providing separate documentation.

Digital Assets: Tax Considerations

Timestamp: [04:51]

• Digital assets (cryptocurrencies, stablecoins, etc.) are property for federal tax purposes, per recent IRS guidance.
• Gifts of digital assets must be detailed on Form 709; instructions now specify how to report them.
• Broad definition includes assets recorded on "cryptographically secured distributed ledgers."
• Notable Quote:
  “Gifts of digital assets are treated like gifts of other property for gift tax purposes.” – Emily Kemble [04:57]

4. Adequate Disclosure Rules & Statute of Limitations

Speaker: James Doherty
Timestamp: [05:59]

• Background: Before 1997, the statute of limitations on IRS adjustments was very limited; the 1997 Taxpayer Relief Act established a three-year limit—but only if "adequately disclosed."
• Recent Developments:
  • Limited IRS and court guidance, but recent U.S. Tax Court opinions have clarified standards.
  • Adequate disclosure is essential to start the clock; it’s not triggered by mere passage of time.
• Three focal points:
  1. Which issues are closed by the statute: Not just valuation, but also legal questions, are closed if adequately disclosed and statute runs.
  2. Whether disclosure was adequate is always a question of fact (as seen in cases like Estate of Brown (2013) and Estate of Sanders (2014)).
  3. What must be disclosed: Regulations outline two "safe harbor" methods:
     • Appraisal method: Requires a compliant appraisal.
     • Description method: Requires certain regulatory disclosures of value and nature.
  • The IRS has sometimes suggested these are the only permissible methods, but that’s been challenged.

Recent Noteworthy Guidance

• IRS Field Attorney Advice (2015): Cautioned that simply listing assets without methodical detail or correct information is insufficient.

• Estate of Slafer (2023): Key Tax Court case now holds:

  • Safe harbors (appraisal and description) are not exclusive.
  • Substantial compliance, not strict compliance, is the operative standard.
  • Minor errors do not defeat adequacy if the IRS can understand the nature and value basis of the gift.

• Notable Quote:
  “The court confirmed that the appraisal method and description method are safe harbors and not the sole means to meet adequate disclosure. So second, the standard is substantial compliance and not strict compliance.” – James Doherty [11:32]

• Practical takeaway: Always review prior returns for disclosure adequacy and, if necessary, amend returns to ensure statute protection.

Notable Quotes & Memorable Moments

• On e-filing modernization:
  “...the MEF system allows for the filing to be paper free and provides proof of filing very quickly.” – James Doherty [02:57]
• On split gifts reforms:
  “With this procedure, the consenting spouse no longer signs the donor spouse’s gift tax return. Rather, he or she must file what's called a Notice of Consent...” – Emily Kemble [04:14]
• On digital assets:
  “The gift tax specifically applies to transfers of digital assets.” – Emily Kemble [05:02]
• On adequate disclosure and substantial compliance:
  “While adequate disclosure remains a question of fact... we can feel good on the taxpayer side that Slafer sets the standard of substantial compliance.” – James Doherty [12:31]

Segment Timestamps

• New Form 709-NA for Nonresidents: [01:01–02:18]
• E-Filing Now Available: [02:18–04:04]
• Gift Splitting & Digital Asset Guidance: [04:04–05:59]
• Adequate Disclosure Developments: [05:59–12:43]

Conclusion

James Doherty and Emily Kemble provide essential updates for practitioners on gift tax reporting, with a focus on new filing options, compliance shifts, expanding asset classes, and the evolving rules governing how disclosures are judged by the IRS and courts. Their practical, transparent explanations clarify complex regulatory changes and remind listeners of the rising importance of accuracy, documentation, and adapting to digital-era tax compliance.

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