Paul L. Caron

Thursday, July 15, 2021

Soled: The Case For Deunification Of Gift And Estate Taxes

 Jay A. Soled (Rutgers; Google Scholar), Gift and Estate Taxes: The Case for Deunification, 57 Harv. J. on Legis. 439 (2020):

For the last half a century, the federal gift tax has been relegated virtually out of existence. There are many reasons that the gift tax has met this fate, including the current size of the lifetime tax exemption amount and the fact that noncompliance has gone largely unchecked. However, the real culprit in the subversion of the gift tax is the academic community: several decades ago, in the name of theoretical tidiness, it prodded Congress to amalgamate the estate and gift taxes into a unified whole. In retrospect, this exercise has proven to be a blunder that needs to be undone. This analysis posits how Congress can resurrect the federal gift tax and restore it to its former vibrancy.

For many decades, the federal gift tax has been languishing in obscurity. Evidence for this proposition abounds: fewer than 3,000 taxable gift tax returns are filed annually, the gift tax contributes less than $2 billion to the more than $3.3 trillion of annual federal revenue generated, and gift tax noncompliance is rampant. 

The gift tax has met this dark fate for many reasons, including the fact that Congress has set the lifetime exemption at a historically high dollar amount (currently, $11.4 million), and the courts and Internal Revenue Service (“IRS”) have judicially and administratively sanctioned asset value minimization strategies. These factors, combined with the fact that there is no independent third-party information reporting that facilitates IRS oversight, have relegated the gift tax into a status of virtual nonexistence.

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