By Deborah M. Beers, Esq.
Buchanan Ingersoll & Rooney, Washington, DC
Mikel et ux v. Commissioner,1 involved a challenge to approximately 60 gift tax annual exclusions2 claimed by the taxpayers, husband and wife, on their 2007 gift tax returns, which were filed in 2011. After the application of these annual exclusions and the taxpayers' unified credits, their gift tax returns showed no federal gift tax due.
The IRS's challenge to the claimed exclusions was based on its contention that the donees did not receive a "present interest in property" – i.e., an unrestricted right to the immediate use, possession, or enjoyment of property.3 The IRS determined that "the beneficiaries lacked legally enforceable rights to withdraw funds from the trust and hence that taxpayers had made gifts of future, not present, interests."