No, You Do Not Get Two Form 5 Transfers For The Price Of One

When dealing with NFA items, it often pays to consult an attorney, especially when it is for more complicated and uncommon issues.  Relying on an FFL can be give less than satisfying results sometimes.

Our story:  I had a client who was an avid firearms collector, shooter, and owner, not to mention a very nice guy.  I had setup an NFA trust for him quite a few years back, and he had NFA items both in the trust and he had prior NFA purchases titled to himself individually.

Sadly he passed away in 2017.  

I then handled his estate and transferred everything to his heir, who was his sister.  She's a nice lady and has a long-term boyfriend who's also a great and friendly guy. I saved her a ton of money as a less-than-scrupulous FFL dealer had offered her $3,000 for his entire collection.

Let's put it this way - just one of his firearms was worth more than $3,000 alone. I managed to hook her up with honest direct buyers where she got fair prices for the firearms that netted her over ten times that of the FFL's massive low-ball offer.

I also transferred the NFA items via Form 5s to her. 

Form 5 is a tax exempt transfer, so no $200 tax is required, and they tend to get processed reasonably quickly.  

Had a bit of back and forth with the NFA Branch as they wanted some additional documents, but we got that all squared away and done and legally transferred to her.  End of story.

Or so I thought.

I get a call a few weeks ago from her and her now husband, that ATF NFA Branch is asking for further documents.  Even worse I get the bad news that she has stage 4 cancer.

This is peculiar.  They said the NFA Branch letter was looking for certain documents on the transfer that they had never requested before, so I go through and retrieve the requested documents and send them to her ASAP.  Most of them are probate closure documents showing the estate was completed in 2017, which it was.

Sadly she died that week.

I then meet her husband last week as they had just got another inquiry letter and I had him come in to take a look at what was wanted as over the phone it just didn't make any sense.

There was a reason for that.

It turns out the inquiry is not about the transfer of the items I assisted with in 2017.

It's about a transfer of the same items in 2020.

It turns out she sold all the NFA items to an FFL dealer in late 2020.

The dealer instead of doing Form 4s as transfers from the sister to him, instead did them all on Form 5s, naming the estate and the sister jointly as the transferors, and the dealer even signed as the transferor and as transferee.

No you really can't do that.  Not when they've already been legally transferred out of the estate in 2017.  Very much not the way to try and save $200 on each item.  The dealer also messed up the serial number on one of the items to make it all even better.

Not good, and it now makes sense why NFA Branch is very unhappy with the paperwork.  This is because the paperwork is fundamentally flawed junk.

This is what we call a mess. Thankfully it's not my mess. That FFL now has some explaining to do.