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8.7.5.9
(11-06-2007)
Issuing a Notice of Liability on an Unagreed Transferee Case
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Tax Computation Specialists (TCS) are generally responsible for the preparation of Notices of Liability in transferee/transferor
cases.
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Notices are issued to a transferee (at law or in equity) liable for income, estate, and gift taxes; including liability of
a fiduciary under 31 U.S.C. section 3713(b); and in respect of taxes arising on a liquidation of a partnership or corporation,
or on a reorganization within the meaning of IRC 368(a), liability in respect of any tax imposed by the Internal Revenue
Code.
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Issue the notice to the transferee within the applicable statutory period (usually one year beyond the transferor's limitation
date) whether or not a Notice of Deficiency was issued to or assessed against the transferor.
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The term "transferee"
includes transferee of a transferee, heir, legatee, devisee, distributee of an estate, shareholder of a dissolved corporation,
assignee or donee of an insolvent person, successor of a corporation, party to a reorganization defined in IRC 368, and all
other classes of distributees. It also includes in gift tax cases, the donee, without regard to the solvency of the donor,
and any person who, under IRC 6324(a)(2), is personally liable for any part of the estate tax.
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Title 31 of the U.S. Code in section 3713(b) provides a fiduciary is personally liable for tax where he or she has paid debts
or distributed assets without first having satisfied the tax due to the United States, in violation of federal priority found
in section 3713(a).
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Issue the notice the later of the following periods: (1) One year after the liability arises or (2) the collection period
of the tax in respect of which such liability arises.
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IRB 6901 provides for assessment and collection against a transferee of property for tax liability of the transferor, and
describes the types of tax liabilities to which this provision applies.
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There are many different aspects of the law to consider when determining whether the transferee's liability is limited or
full. The Appeals Officer or Counsel Attorney is responsible for making the determination and providing the information to
the TCS when requesting work.
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See IRM 5.17.14.3.1 for discussion of liability under IRC 6901.
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The TCS should consult the Appeals Officer or Counsel Attorney if the case involves a successor-in-interest who might be treated
either as a taxpayer or as a transferee under IRC 6901.
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The following provides a simple overview of limited and full liability:
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Limited Liability - Generally, the liability of the transferee is limited to the excess of the value of the assets received
from the transferor over the consideration paid by the transferee for the assets, if that excess is less than the unpaid liability
of the transferor. If more than one year is involved in a limited liability situation, state the transferee liability as one
figure in the notice and do not allocate the transferee liability to various years.
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Full Liability - Generally, where the excess of the value of the assets received from the transferor over the consideration
paid by the transferee for the assets is more than the unpaid liability or deficiency of the transferor, the transferee is
liable for the full amount of the unpaid liability or deficiency of the transferor. If more than one year is involved in a
full liability situation, assert the transferee liability for the same years as that of the transferor.
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Usually transferee cases in which Notices of Liability are issued by Appeals, cover the following situations:
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Transferee liability for the full liability for the unpaid deficiency of the transferor. See Exhibit 8.7.5-5.
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Transferee liability for limited liability for the unpaid deficiency of the transferor. See Exhibit 8.7.5-6.. (The Form 5278 and explanations use the same format as those shown in Exhibit 8.7.5-5.
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Transferee liability for the full liability for the unpaid original assessment of the transferor.
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Transferee liability for limited liability for the unpaid original assessment of the transferor.
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There are four parts to the Notice of Liability:
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For transferee cases involving types of tax other than income tax, alter the letter and statements to fit the type of tax.
8.7.5.9.1
(11-06-2007)
Identification of Tax Years in Transferee Notice
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Transferor assessments are made on Master File (MF) for the appropriate tax year.
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Transferee liability assessments are made on Non-Master File (NMF) using the transferor's tax year.
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For example, if the transferor is XYZ Corporation with a fiscal year ending 09/30/95, and the transferee is Joe Smith with
a tax year ending 12/31/95, the assessment against Joe Smith would be made Non-Master File using a taxable period of 09/30/95.
Therefore, the transferee notice of liability would show the tax year for Joe Smith as 09/30/95.
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In the reverse situation, if the transferor is John Doe for a tax year ending 12/31/96 and the transferee is ZZZ Company with
a fiscal year ending 08/31/96, the transferee notice of liability for ZZZ Company would show the tax year as 12/31/96.
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Although the tax year shown in the notice for the transferee is that of the transferor, use the transferee's taxpayer identification
number on the notice letter, Form 4089, and waiver.
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If the value of assets received is less than the unpaid liability or deficiency of the transferor and more than one year is
involved, the transferee liability is not allocated to various years but is stated as one figure in the notice. See Exhibit 8.7.5-6. This exhibit contains an example of language to use in the first paragraph of the notice letter, in the Form 870 and in the
Notice of Deficiency statement.
8.7.5.9.2
(11-06-2007)
Letter 3424(cg) - Notice of Liability
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Letter 3424(cg) - only address to the transferee but identify the transferor in the opening paragraph.
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Use this letter instead of Letter 901(cg). A copy of this letter is shown in See Exhibit 8.7.5-5..
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A special opening paragraph is used depending on the type of transferee liability involved. Use the opening paragraphs shown
below. When using APGolf, select the appropriate paragraph when generating the letter. The opening paragraphs in APGolf also
give the option to select full or limited liability.
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In limited liability cases the opening paragraph of the letter is modified to reflect the limited liability of the transferee.
8.7.5.9.2.1
(11-06-2007)
Opening Paragraphs for Letter 3424(cg)
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Letter 3424(cg) must include special opening paragraphs, depending on the type of transferee liability. These paragraphs are
shown at (2) below. Select the appropriate paragraphs when generating the letter using APGolf.
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In limited liability cases the APGolf opening paragraphs give the option to select full or limited liability. If limited liability
is selected, then the opening paragraph generated using ACDS for the Letter 3424(cg) is modified appropriately.
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See example of a modified opening paragraph at (2)(a) below.
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The following opening paragraphs are generally used in letters addressed to transferees with respect to their liabilities
for an unpaid deficiency of the transferor in income, estate and gift tax cases.
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Full liability:
"The determination of the (type of tax) tax liability of (Transferor), (Address), discloses a deficiency, as shown above. The amount of the deficiency, plus interest as the law provides, constitutes your
liability as transferee of assets of (Transferor), and will be assessed against you. The enclosed statement shows how we figured the transferor’s deficiency."
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Limited liability:
"The determination of the (type of tax) tax liability of (Transferor), (Address), discloses a deficiency, as shown above. $______ of the amount of the deficiency, plus interest as the law provides, constitutes
your liability as transferee of assets of (Transferor), and will be assessed against you. The enclosed statement shows how we figured the transferor’s deficiency."
Note to Tax Computation Specialist - Modify the other paragraphs shown below in a similar fashion if there is limited liability of the transferee. This can
be done in most cases by selecting the limited liability option in ACDS, so the opening paragraph generated by ACDS for the
Letter 3424(cg) is modified appropriately.
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Opening paragraphs for letters addressed to transferees or fiduciaries in the following unique situations are shown below:
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Transferees with respect to their liabilities when there is an unpaid deficiency of the transferor for one year in excess
of an overpayment by the transferor for another year:
"The determination of the income tax liability of (Transferor), (Address), for the tax years ended ___and ___, discloses a deficiency in the amount of $___ for the tax year ended ___, and an overassessment
of $___ for the tax year ended ___, as shown in the attached statement. The amount of the deficiency, plus interest as the
law provides, constitutes your liability as transferee of assets of (Transferor), and will be assessed against you. The overassessment, to the extent that it represents an overpayment of tax, will be refunded
or credited as the law provides."
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Transferees with respect to their liabilities for an unpaid original tax of the transferor:
"We will assess against you, for unpaid income tax, the amount of $___, plus interest as the law provides. This constitutes
your liability as transferee of assets of (Transferor), (Address), for unpaid income taxes in the above amounts, plus interest as the law provides, due from (Transferor), for the tax year ended ___, as shown in the attached statement."
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Decedents’ estate when it is proposed to hold an estate liable for the payment of a deficiency due from a corporation of which
the decedent was a transferee during his/her lifetime:
"During his/her lifetime, (Taxpayer), Deceased, (Address), incurred an income tax liability in the amount of $___, as transferee of assets of (Transferor), (Address), for the tax year ended ___, as shown in the attached statement. This amount, plus interest as the law provides, will be
assessed against the estate of the decedent."
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Transferee of a transferee with respect to their liabilities for an unpaid deficiency of the transferor:
"The determination of the income tax liability of (Transferor), (Address), discloses a deficiency, as shown above. The amount of the deficiency, plus interest as the law provides, constitutes your
liability as transferee of assets of (First Transferee), transferee of assets of (Transferor), and will be assessed against you. The enclosed statement shows how we figured the deficiency."
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Personal liability under 31 U.S.C. section 3713(b) if the fiduciary has paid debts and/or distributed assets of the estate
without first having satisfied the tax due to the United States from such estate, in violation of federal priority. Insert
the type of tax, i.e. income, estate or gift, in the first sentence. This can be done by selecting the appropriate opening
paragraph when using ACDS to generate the Letter 3424(cg):
"The determination of the (type of tax) tax liability of (Transferor), (Address), discloses a deficiency, as shown above. $___ is the amount of your personal liability under 31 U.S.C. section 3713(b),
as amended, as fiduciary of (Taxpayer), based on the amounts paid and/or distributed in violation of the federal priority afforded in 31 U.S.C. section 3713(a),
plus interest as the law provides, which will be assessed against you. The enclosed statement shows how we figured the liability."
Note:
There is no need to have different paragraphs for full liability and limited liability if personal liability under 31 U.S.C.
section 3713(b) is involved. Always use the paragraph format above and enter the appropriate amount of personal liability
in the space provided.
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Transferee, trustee and/or insurance beneficiary of estate tax:
"The determination of the estate tax liability of (Transferor), (Address), discloses a deficiency, as shown above. The amount of the deficiency, plus interest as the law provides, constitutes your
liability as transferee, trustee, and beneficiary of assets of (Transferor), and will be assessed against you. The enclosed statement shows how we figured the deficiency."
Note:
"Trustee"
is to be used pursuant to IRC 6324 and IRC 6901, Internal Revenue Code, if the property is included in the gross estate
under sections 2035, 2036, 2037, 2038, 2040, 2041, or 2042, Internal Revenue Code. "Trustee"
and/or "beneficiary"
should be omitted if inapplicable. Such notice should be issued within the 3-year period under section 6501, Internal
Revenue Code.
8.7.5.9.2.2
(11-06-2007)
Modify Opening Paragraph for Jeopardy Assessment Against Transferee
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If a jeopardy assessment has been made under IRC 6861 and IRC 6862 against a transferee with respect to an unpaid liability,
modify the opening paragraphs as discussed below: ( See IRM 8.7.5.9.2.1.)
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Delete the reference at the end of the second sentence that reads: "and will be assessed against you"
.
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Add the following at the end of the paragraph: "We have assessed the liability under the Internal Revenue laws that apply
to jeopardy assessments."
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These changes may be accomplished by generating Letter 3424(cg) using APGolf. Select one of the six paragraphs listed in the
APGolf Letter 3424 input screen under "Jeopardy Assessments"
and the changes to the opening paragraph will be made when the letter is generated.
Example:
The full liability opening paragraph would read as follows: "The determination of the (type of tax) tax liability of (Transferor),
(Address), discloses a deficiency, as shown above. The amount of the deficiency, plus interest as the law provides, constitutes
your liability as transferee of assets of (Transferor). The enclosed statement shows how we figured the deficiency. We have
assessed the liability under the Internal Revenue laws that apply to jeopardy assessments."
8.7.5.9.3
(11-06-2007)
Statement Face Sheet in Notice of Liability
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The Statement Face Sheet (hereinafter referred to as "statement"
) summarizes the liability of the transferee with specific explanatory paragraphs. See IRM 8.7.5.9.3.1. Explanatory paragraphs to use on the statements are discussed below. See IRM 8.7.5.9.3.2.
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It is recommended Form 4089-A be used for the statement so all the necessary information is included on the form. However,
Form 4089 and an attachment can also be used.
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In limited liability cases, it may become difficult to include all the information in the recommended format on Form 4089
or Form 4089-A. In these instances, provide the information on a separate schedule used in place of Form 4089 or Form 4089-A
and label the schedule "Notice of Liability Statement."
( See Exhibit 8.7.5-6.)
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See IRM 8.7.5.9.3.1. This is a discussion on the set-up of the statement for a transferee of a transferee, trustee, fiduciary, beneficiary, or
for other kinds of taxes or for personal liability.
8.7.5.9.3.1
(11-06-2007)
Set Up of Statement Attached to Transferee Notice
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A transferee notice contains a statement that is attached to the letter. The statement is a Form 4089 and attachment, Form
4089-A, or a separate schedule labeled "Notice of Liability Statement"
. See IRM 8.7.5.9.3.
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If the value of the assets received by a transferee is less than the unpaid tax liability of the transferor, modify the paragraphs
to include the following language:
"Since the value of the assets you received amounted to $___, your liability as transferee is limited to that amount."
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Examples of statements for transferee Notices of Liability most commonly issued by Appeals are shown below:
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Statement - Full Liability for unpaid deficiency of transferor:
Prepare the statement for transferee cases involving full liability for an unpaid deficiency as shown below. See IRM 8.7.5.9.3.2. This shows the appropriate paragraphs to include on the face sheet after the summary of liability of the transferee.
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Statement - Limited Liability for unpaid deficiency
Prepare a statement as shown below when the value of the assets received by the transferee are of a value less than the unpaid
deficiency of the transferor. Since more than one year is involved in this example, show the transferee liability as one figure
and do not allocate it to the various years. Select an appropriate paragraph to include on the face sheet after the summary
of liability of the transferee. In addition, add a paragraph to mention the limited liability of the transferee and the amount,
as shown below:
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Statement - Full Liability for unpaid original assessment
Prepare the statement for transferee cases involving full liability for an unpaid original assessment as shown below. Select
an appropriate paragraph to include on the face sheet after the summary of liability of the transferee. Replace any references
to "deficiency"
in the paragraphs with the words "unpaid income tax."
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Statement - Limited Liability for unpaid original assessment:
Prepare the statement for transferee cases involving limited liability for an unpaid original assessment as shown below. Since
more than one year is involved in this example, show the transferee liability as one figure and do not allocated to the various
years. Select an appropriate paragraph to include on the face sheet after the summary of liability of the transferee. Replace
any references to "deficiency"
in the paragraphs with the words "unpaid income tax."
In addition, add a paragraph to mention the limited liability of the transferee and the amount, as shown below:
8.7.5.9.3.2
(11-06-2007)
Paragraphs for Statement Attached to the Notices for Transferees
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As indicated in the examples shown, insert paragraphs in the statement after the summary of income tax deficiency (liability)
or after the summary of liability of the transferee, whichever is applicable. The type of transferee case involved helps determine
which paragraphs are inserted. See IRM 8.7.5.9.3.1.
Note:
The "statement"
is Form 4089-A, Form 4089 and an attachment, or a separate schedule labeled "Notice of Liability Statement"
.
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The statement must include a summary of the liability of the transferee. In limited liability situations, show the transferor
liability as well.
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The examples shown at (4) below do not include the liability amounts. The liability of the transferee (and transferor where
appropriate) must be inserted into the examples.
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Limited liability - If the value of the assets received by a transferee is less than the unpaid tax liability of the transferor,
modify the paragraphs shown at (4) below to include the following language:
Since the value of the assets you received amounted to $___, your liability as transferee is limited to that amount.
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Examples of transferee statements are shown below.
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Paragraphs for the statement to be attached to the letter addressed to a transferee with respect to liability for an unpaid
deficiency of the transferor:
John Doe, Transferor
(Address)
Tax liability for the tax year ended ___
Harry Brown, Transferee
(Address)
It is determined that assets of John Doe, (Address), were transferred to you on or about (date).
The above amount is your liability as a transferee of assets of John Doe for a deficiency in income tax due from John Doe
for the tax year shown above.
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Paragraphs for the statement to be attached to the letter addressed to a transferee with respect to liability for unpaid original
tax of the transferor:
John Doe, Transferor
(Address)
Tax liability for the tax year ended ___
Harry Brown, Transferee
(Address)
It is determined that assets of John Doe, (Address), were transferred to you on or about (date).
The above amount is your liability as a transferee of assets of John Doe for unpaid income tax due from John Doe for the tax
year shown above.
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Paragraphs for the statement to be attached to the letter addressed to a transferee of assets of a corporation:
Mack Company, Transferor
(Address)
Tax liability for the tax year ended ___.
Richard Roe, Transferee
(Address)
It is determined that the Mack Company, (Address), has been dissolved and that assets were transferred to you on or about (date).
The above amount is your liability as a transferee of assets of the Mack Company for a deficiency of income tax due from the
Mack Company for the tax year shown above.
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Paragraphs for the statement to be attached to the letter addressed to a transferee of assets of an estate:
Estate of Joe Doe, Deceased, Transferor
(Address)
TIN: _____
Tax liability for the tax year ended ___.
Richard Roe, Transferee
(Address)
TIN: _____
It is determined that assets of the above-named decedent’s estate were transferred to you on or about (date).
The above amount is your liability as a transferee of assets of the Estate of John Doe for a deficiency in income tax due
from his estate for the tax year shown above.
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Paragraphs for the statement to be attached to the letter addressed to decedent’s estate for the liability of the decedent
incurred prior to date of his death as a transferee of the assets of a corporation, estate, or other transferor:
Mack Company, Transferor
(Address)
TIN: _____
Tax liability for the tax year ended ___.
It is determined that the Mack Company, (Address), has been dissolved, that assets were transferred to John Doe on or about (date), and that payment of an income tax deficiency in the amount of $___ for the tax year shown above is due from that corporation.
The above amount represents the liability of the Estate of John Doe, Deceased, for payment of the deficiency due from the
Mack Company, which liability was incurred by John Doe during his lifetime as a transferee of assets of said corporation.
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Paragraphs for the statement to be attached to the letter addressed to a transferee of a transferee of assets of a corporation,
estate, or other transferor:
Mack Company, Transferor
(Address)
TIN: _____
Tax liability for the tax year ended ___.
Richard Roe, Transferee
(Address)
TIN: _____
It is determined that the Mack Company, (Address), has been dissolved, that assets were transferred to Richard Roe Company on or about (date), and that the Richard Roe Company has been dissolved and its assets were transferred to you on or about (date).
The above amount is your liability as a transferee of assets of the Richard Roe Company, (Address), transferee of assets of the Mack Company, (Address), for an income tax deficiency due from the Mack Company for the tax year shown above.
Note:
If an estate or other taxpayer is the transferor, the above figures should be changed to cover the facts in the particular
case.
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Paragraphs for the statement to be attached to the letter addressed to trustees of a decedent’s estate where the duly qualified
executors or administrators have been discharged and they or others have been appointed trustees:
Estate of John Doe, Deceased, Transferor
(Address)
TIN: _____
Tax liability for the tax year ended ___.
It is determined that Richard Doe and Clara Doe were the qualified executor and executrix of the Estate of John Doe, Deceased,
until they were discharged as such on (date) and that they have been since that time and are now the trustees of that estate.
The above amount represents the liability of the trust created under the will of John Doe as transferee of assets of his estate
for a deficiency of income tax due from him (or his estate) for the tax year shown above.
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Paragraphs for the statement to be attached to the letter addressed to a fiduciary who has incurred personal liability for
payment of the tax of an estate under 31 U.S.C. section 3713(b), through failure to observe the priority to the United States:
Estate of John Doe, Deceased
(Address)
TIN: _____
Tax liability for the tax year ended ___.
Richard Roe
(Address)
TIN: _____
It is determined that you were served with proof(s) of claim by the United States on (date(s)). The records of the (name of court), (Address), show the Estate of John Doe, Deceased, was closed on (date), and that certain debts were paid or distribution of the assets was made after such service without first satisfying the
tax due to the United States from the estate in violation of the federal priority provided in 31 U.S.C. section 3713(a).
The above amount is your personal liability under 31 U.S.C. section 3713(b), as amended, for a deficiency of income tax due
from the Estate of John Doe, Deceased, for the tax year shown above.
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Paragraphs for the statement to be attached to the estate tax letter addressed to a transferee of property received from an
estate after decedent’s death:
Estate of John Doe, Deceased, Transferor
(Address)
TIN: _____
Richard Roe, Transferee
(Address)
TIN: _____
It is determined that property of the Estate of John Doe, Deceased, was transferred to you on or about (date). The liability
of the estate for estate tax has not been discharged. The above amount is your liability as a transferee of property of that
estate. Your liability does not exceed the value of the property you received.
The estate tax return filed by the executor (executrix or administrator) on Form 706 has been verified as filed except as
follows:
(Show changes as in usual setup to the estate.)
-
Paragraphs for the statement to be attached to the estate tax letter addressed to a fiduciary who has incurred personal liability
for payment of the estate tax of an estate under 31 U.S.C. section 3713(b), through failure to observe the priority of the
United States.
Estate of John Doe, Deceased
(Address)
TIN: _____
Richard Roe
(Address)
TIN: _____
It is determined that you have served as a fiduciary of the estate of the decedent named above, that the estate tax liability
of the estate has not been discharged, and that you, as a fiduciary, paid a debt or debts, or distributed the estate in whole
or in part without first discharging the estate tax liability. Accordingly, under 31 U.S.C. section 3713(b), as amended, you
are personally liable for the undischarged estate tax to the extent of such payments and distributions. The above amount is
your personal liability.
The estate tax return filed by the executor (executrix or administrator) on Form 706 has been verified as filed except as
follows:
(Use same setup as to estate).
-
Paragraphs for the statement to be attached to the estate tax letter addressed to a transferee of property transferred by
the decedent during his/her life, or insurance, powers of appointment, and jointly owned property with right of survivorship:
Estate of John Doe, Deceased, Transferor
(Address)
TIN: _____
Richard Roe, Trustee and Transferee,
or
(Insurance beneficiary and transferee)
or
(Trustee, Insurance beneficiary and transferee)
(Address)
TIN: _____
First paragraph to include on the statement:
It is determined that property included in the gross estate of the decedent named above for the purpose of estate tax was
transferred to or received by you on or about (date), and that the liability of the estate for estate tax has not been discharged.
Second paragraph to include on the statement - Select one of the following paragraphs:
The above amount is your liability as transferee and trustee of property under a trust created by the decedent on (date), of which you are trustee. The amount of your liability does not exceed the value of the property you received,
OR
The above amount is your liability as transferee and trustee of insurance upon the life of John Doe, Deceased, the policy
(or policies) numbered ___having been issued by your company. The proceeds of the insurance are being held in whole or in part by your
company and the income (or the income and part of the principal) is being paid to a designated beneficiary (or beneficiaries). The amount of your liability does not exceed the amount of insurance.
OR
The above amount is your liability as a transferee of property from the decedent during his lifetime on or about (date or dates) and also from the estate at or after his death. The amount of your liability does not exceed the value of the property you
received.
Third paragraph to include on the statement, if appropriate:
The estate tax return filed by the executor (executrix or administrator) on Form 706 has been verified as filed except as follows: (Show changes as in usual setup to the estate.)
Note:
Combinations and variations of the above statement will be necessary. Each one should be worded to cover the particular case,
care being exercised to combine with "transferee"
the appropriate term "trustee"
or "insurance beneficiary"
or both.
-
Paragraphs for the statement to be attached to the gift tax letter addressed to a transferee of property from an individual
as a gift:
John Doe, Donor
(Address)
TIN: _____
Richard Roe, Transferee
(Address)
TIN: _____
It is determined that on or about (date or dates) John Doe transferred property to you as a gift (or gifts) and that the gift tax liability has not been discharged. The above amount(s) is your liability as a transferee of the property
you received.
The gift tax return by the donor (executor) on Form 709 has been verified as filed except as follows:
(Show usual setup.)
-
Paragraphs for the statement to be attached to the gift tax letter addressed to a fiduciary who has incurred personal liability
for payment of the gift tax of a deceased donor under 31 U.S.C. section 3713(b), through failure to observe the priority of
the United States:
Estate of John Doe, Deceased
(Address)
TIN: _____
Richard Roe
(Address)
TIN: _____
It is determined that you have served as executor (or administrator) of the Estate of John Doe, Deceased. At the time of his death, he was indebted to the United States for gift tax upon the
transfer of certain property as a gift (or gifts). It also appears that you, as fiduciary, paid a debt or debts of the decedent or distributed the estate in whole or in part
after notification of such indebtedness without first discharging the gift tax liability. Accordingly, under 31 U.S.C. section
3713(b), as amended, you are personally liable for the undischarged gift tax to the extent of such payments and distributions.
The above amount is your personal liability.
The gift tax return by the donor (executor) on Form 709 has been verified as filed except as follows:
(Use same setup as to donor.)
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Paragraphs for the statement to be attached to the gift tax letter addressed to a trustee as transferee of property received
from an individual as a gift in trust for the benefit of others:
John Doe, Donor
(Address)
TIN: _____
Welmore Trust Co., Trustee and Transferee
(Address)
TIN: _____
It is determined that on or about (date or dates) John Doe transferred property to you as gifts under a trust (or trusts) (dated) for the benefit of a certain person(s) named therein, and that the gift tax liability has not been discharged. The above
amount(s) is the liability of your company as trustee and transferee of the property you received.
The gift tax return by the donor (executor) on Form 709 has been verified as filed except as follows:
(Show same setup as to donor.)
8.7.5.9.4
(11-06-2007)
Explanations of Adjustments and Computation of Tax
-
Include explanations of adjustments and all schedules showing the computation of the transferor's tax in the notice prepared
for the transferee if possible. This only applies if the notice involves deficiencies (not unpaid original assessment) of
the transferor.
-
A photocopy of these explanations and schedules can be used if the transferor's Notice of Deficiency has already been prepared.
-
If the transferor's liability has been judicially determined, omit the adjustments to income, explanation of adjustments,
and computation of tax of the transferor and insert the following type of paragraph on the statement:
"The correctness of the amount of the deficiency due from John Doe, Transferor, has been determined by decision of the Tax
Court of the United States, Docket no. XXXXX-XX."
8.7.5.9.5
(11-06-2007)
Waiver Needed When Form 4089-A is Used
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Waiver - If Form 4089-A is used, prepare Form 870 or Form 890. Special language is required on Form 870, or Form 890. The
following paragraphs provide suggested language to use in various situations.
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In the case of full liability of a transferee (other than one liable under 31 U.S.C. section 3713(b)):
"This represents the undersigned's liability as a transferee of assets of (Transferor), (Address), for (kind of tax) plus interest as provided by law, due from said (Transferor)."
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In the case of limited liability of a transferee (other than one liable under 31 U.S.C. section 3713(b)):
"The determination of the income tax liability of (Transferor), (Address), for the tax year ended ___discloses a deficiency in tax as shown above. $ ___of the amount of the deficiency represents
the undersigned's liability as a transferee of assets of (Transferor), (Address), for (kind of tax), plus interest as provided by law, due from said (Transferor)."
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In the case of a transferee of a transferee:
"This represents the undersigned's liability as a transferee of assets of (First Transferee), (Address), transferee of assets of (Transferor), (Address), for ( kind of tax), plus interest as provided by law, due from said (Transferor)."
Note:
Modify the above paragraph in a manner similar to the example shown in paragraph (3) if there is limited liability.
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In case the liability is of a fiduciary under IRC 6901 and 31 U.S.C. section 3713(b):
"This represents the undersigned's personal liability under 31 U.S.C. section 3713(b) for (kind of tax), plus interest as provided by law, due from said (Taxpayer)."
Note:
Modify the above paragraph in a manner similar to the example shown in paragraph 3 if there is limited liability.
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