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Barrister
Barrister, Attorney
Category: Legal
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Experience:  14 yrs practice, Civil, Criminal, Domestic, Realtor, Landlord 24+ yrs
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father-in law passed dec 2011......all monies/stocks etc were

Resolved Question:

father-in law passed dec 2011......all monies/stocks etc were divided equally by 5 siblings
one insurance would not divide proceeds....therfore sent to one sibling...this person then divided to rest of family siblings.....did not send anyone any paperwork..............however - IRS now sent a payment due notice plus late fees to the sibling of record - total amout was about $70,000......now what????
Submitted: 1 year ago.
Category: Legal
Expert:  Barrister replied 1 year ago.
Hello and thank you for using JA! My goal is to provide you with excellent service and help with your legal problem.
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Was the insurance policy made out to a single sibling beneficiary?
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And they then received the money and divided it up among all the siblings?
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Was the payment due notice for delinquent gift taxes?
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How much did each sibling other than the benefiicary receive?
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Thanks
Barrister
Customer: replied 1 year ago.

Yes - the insurance company sent one sibling entire amout....that person then sent each sibling 1/5....keeping 1/5 for themselve......the irs notice was for not reporting gift. each person received about $18000

Expert:  Barrister replied 1 year ago.
Ok, in a situation like this, the named beneficiary would have received the entire proceeds of the insurance policy tax free. However when they divided it among the siblings, since this was the beneficiaries money solely, they would be deemed to have made a gift of the $18K to each sibling. The yearly exclusion amount for gifts is $13K for 2012 (assuming this is when the gifts were made) so there would have been gift tax due on the additional $5K over the annual exemption amount. With that said, the person who made the gifts would be responsible for paying the gift taxes on the $5K per gift.
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With that said, it may be possible to get an accountant to go back and file an amended tax return along with an IRS Form 709 and use up a small part of the $5.12 million lifetime gift tax exemption for 2012 if this is when the gifts were made. This would allow the additional $5K per person to be deducted from the lifetime exemption resulting in no tax being sue.
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So at this point the person who made the gifts to siblings would really need to contact an accountant or CPA to see if they could amend their tax returns so as to claim the exemption so no gift tax would be due. There may be some type of penalty for not originally claiming the exemption, but it should be much less than the gift tax would be otherwise.
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Thanks.

Barrister

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Barrister, Attorney
Category: Legal
Satisfied Customers: 22432
Experience: 14 yrs practice, Civil, Criminal, Domestic, Realtor, Landlord 24+ yrs
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