SECTION 2. BACKGROUND

Under § 6501(c)(9), as amended by the Taxpayer Relief Act of 1997, 1997–4 (Vol. 1) C.B. 1, 69, and the Internal Revenue Restructuring and Reform Act of 1998, P.L. 105-206, 112 Stat. 685, if the value of a gift is required to be shown on a gift tax return but is not disclosed on the return, or on a statement attached to the return, in a manner adequate to apprise the Internal Revenue Service of the nature of the transfer, the period of limitations on assessment of gift tax with respect to the gift will not begin to run. If the transfer is adequately disclosed on the gift tax return and the period of limitations on assessment of gift tax has expired, then, under § 2504(c), the value of the gift cannot be adjusted for purposes of determining “prior taxable gifts” and the current gift tax liability and, under § 2001(f), the value of the gift cannot be adjusted for

purposes of determining “adjusted taxable gifts” and the estate tax liability.

Section 301.6501(c)–1(f)(2) provides that a transfer is adequately disclosed on a return only if it is reported in a manner adequate to apprise the Service of the nature of the gift and the basis for the value reported. Section 301.6501(c)–1(f)(2)(i) through (v) sets forth the information that must be disclosed on the gift tax return, or on a statement attached to the return, to adequately apprise the Service of the nature of the gift and its value.

The period of limitations on assessment of gift tax with respect to a gift will commence to run only if the donor submits the information required under § 301.6501(c)–1(f)(2) to adequately disclose that gift. The general rule under § 6501(a), that gift tax must be assessed within 3 years of the later to occur of the date the gift tax return is filed or due (except as otherwise provided under §§ 6501(c) and(e)), applies from the date the donor submits all the required information for that gift, if that information was not originally submitted with the gift tax return.