California Code of Regulations
Title 18 - Public Revenues
Division 2.5 - State Controller
Chapter 2 - Gift Tax
Article 7 - Determination of Tax
Section 15807 - Amendment of Determinations, Prior Year Gifts
When the Controller makes an original, amended or supplemental determination of a deficiency for a calendar quarter which is prior to calendar quarters for which the tax has previously become final, he may concurrently therewith, notwithstanding other provisions of the Gift Tax Law, determine the true amount of tax which would have been determined had all the determinations been made in the sequence in which the gifts were made. This regulation may be illustrated by the following example:
EXAMPLE.
A makes a gift of $20,000 to B, his adult daughter in October, 1967, but fails to file a return. In 1968, A makes another gift to B in the amount of $30,000 for which he files a timely return. A notice of determination of the tax due in the amount of $680 for the 1968 gift is issued in 1969, under the law then in effect, and the tax is paid.
| $ 3,000 | annual exemption | |
| 5,000 | specific exemption | |
| 20,000 | @ 3% | $600 |
| 2,000 | @ 4% | 80 |
| $30,000 | $680 |
The failure to report the 1967 gift is discovered in 1973, after the determination issued in 1969 has become final. See Revenue and Taxation Code Section 15803. By reason of the 1967 gift, there is a deficiency for the 1968 gift, as well as the deficiency for the unreported 1967 gift. Pursuant to the provisions of Revenue and Taxation Code Section 15807, a determination for the deficiency for the 1968 gift may nevertheless be issued, in addition to the determination of deficiency for the 1967 gift.
The tax due for the several gifts is computed as follows:
| (1) | 1967 gift: | |||
| (a) | Net taxable gift ($20,000--$3,000) | $17,000 | ||
| (b) | Specific exemption 5,000 | 5,000 | ||
| (c) | Tax on balance ($12,000 @ 3%) | 360 | ||
| (d) | Penalty (Section 15681) | 18 | ||
| (e) | Total tax plus penalty, 1967 gift | 378 | ||
| (2) | 1968 gift: | |||
| (a) | Total net tax gifts | |||
| (1967: $20,000--$3,000 plus | ||||
| 1968: $30,000--$3,000) | $44,000 | |||
| (b) | Specific exemption | 5,000 | ||
| (c) | Tax on total ($20,000 @ 3% plus | |||
| $19,000 @ 4%) | 1,360 | |||
| (d) | Tax on prior year gifts (1967 deficiency) | 360 | ||
| (e) | Tax on 1968 gift | 1,000 | ||
| (f) | Tax previously paid | 68 | ||
| (g) | Deficiency, 1968 gift | 320 | ||
In the case of the 1967 gift tax deficiency, the tax plus penalty is subject to interest at the rate of 7 percent per annum from June 15, 1968 until paid. Interest at 7 percent per annum accrues on the 1968 tax deficiency beginning 90 days after the date of the amended determination.
NOTE: Reference: Section 15807, Revenue and Taxation Code.
