On May 22, 2023, the U.S. Tax Court determined that the IRS was time-barred from assessing gift tax against taxpayer Ronald Schlapfer.

In 2012, Mr. Schlapfer entered into the Offshore Voluntary Disclosure Program (OVDP), a temporary program that allowed taxpayers to report previously undisclosed income from offshore assets. As part of his OVDP submission, Mr. Schlapfer included a 2006 gift tax return. The period of assessment ended on November 30, 2017, and in October 2019, the IRS issued a notice of deficiency asserting that Mr. Schlapfer owed approximately $4.4 million in gift tax and an additional $4.3 million in penalties. The IRS contended that, even though more than three years had passed since Mr. Schlapfer’s disclosure, its notice of deficiency was timely because Mr. Schlapfer failed to adequately disclose the gift.

In a Memorandum Opinion, the Tax Court disagreed with the Service and held that, even though Mr. Schlapfer may not have accurately reported the gift (he reported a gift of stock instead of an insurance policy), did not list all of the donees of the gift and did not describe the method used to determine the fair market value of the gift, he nonetheless substantially complied with the adequate disclosure requirements under the Internal Revenue Code and Treasury Regulations, rendering the Service’s assessment barred by the three-year statute of limitations (Schlapfer v. Comm’r, T.C. Memo. 2023-65).

A link to the Court’s opinion can be found here:

Schlapfer v. Comm’r of Internal Revenue, No. 419-20 | Casetext Search + Citator


Thank you David Goldstein for this week’s Tax Tracker post!