Since 2008, the US Congress has said that any gifts from a covered expatriate to a US person will be subject to the Internal Revenue Code Section 2801 tax. This 2801 tax is onerous because it imposes a gift/inheritance tax on the US person of up to 40%. So, a covered expatriate gifts 1m to a US person, under current US tax law the US person should have to pay roughly 400k to the IRS. The only problem is that there is no form to file with the IRS. The IRS published a draft Form 708 years ago, but never officially made it available.
We have recently been advising some clients who are really concerned about this nearly 12 year old ‘dormant’ tax to file a protective Form 708. This would theoretically start the statute of limitations in the IRS.