Title Examination Standards
Chapter 1, App.
Chapter 25. Tax Liens
§25.4. The Federal Gift Tax Lien.

1. A. SCOPE.

   The federal gift tax lien attaches at the date of the gift to all property transferred by a donor to a donee.

   Authority: 26 U.S.C. § 6324(b). Comment: 1. This lien is a "secret" lien since it does not require recording to be effective. 2. The federal gift tax lien is not valid as against a mechanic's lien or, subject to the conditions provided in 26 U.S.C. § 6323(b), any other lien or security interest described in 26 U.S.C. § 6323(b). See 26 U.S.C. § 6324(c)(1). 3. If the gift tax is not paid when due, the donee of any gift during that same calendar year is personally liable for the tax to the extent of the value of the gift, even though no gift tax was due with respect to the property transferred to such donee, LaFortune v. Commissioner, 263 F.2d 186 (10th Cir. 1958); Bauer vs. Commissioner , 145 F.2d 338 (3d Cir. 1944). 4. This lien is in addition to, and not in lieu of, the general federal tax lien available under 26 U.S.C. § 6321 (Treas. Regs. § 301.6324-1(d)).

2. B. DURATION.

   The federal gift tax lien continues until it becomes unenforceable by lapse of time or for ten (10) years after the date of the gift.

   Authority: 26 U.S.C. § 6324(b). Comment: See Comment above under A.

3. C. DIVESTITURE.

   Any part of the gift transferred by the donee (or by a transferee of the donee) to a purchaser or holder of a security interest is divested of the federal gift tax lien; such lien, to the extent of the value of the gift, attaches to all the property (including after-acquired property) of the donee (or the transferee) except any part transferred to a purchaser or holder of a security interest.

   Authority: 26 U.S.C. § 6324(b). Comment: The lien is removed, unless discharged by payment or lapse of ten (10) years, only by a transfer to a bona fide purchaser or mortgagee for an adequate and full consideration in money or money's worth. To the extent property is thereby divested of the lien, the lien attaches to all the property of the donee including after-acquired property, except to the extent transferred to a bona fide purchaser or mortgagee for an adequate and full consideration in money or money's worth (Treas. Regs. § 301.6324-1(b)).

History: This standard was reworked completely and its adoption recommended by the Report of the Title Examination Standards Committee, 57 O.B.J. 2677, 2687 (1986). It was approved by the Real Property Section, November 20, 1986, and adopted by the House of Delegates, November 21, 1986.