Law Commons^™

Estate Planning For Cannabis Business Owners: An Introduction, Bridget J. Crawford, Jonathan G. Blattmachr

Elisabeth Haub School of Law Faculty Publications

As more states legalize cannabis sales, estate planners may increasingly be called upon to advise clients with interests in cannabis-related businesses. This essay seeks to assist estate planners in two ways. First, it aims to raise general awareness of cannabis business owners' unique concerns. Second, the essay provides an overview of some of the fundamental issues about which cannabis business owners are likely to seek estate planning advice: business formation matters, wealth transfers, the ability of trusts to own cannabis-related businesses, and gift, estate, and income tax considerations.

In most states that permit legal cannabis sales, there is limited (or …

Wealth Transfer Tax Planning After The Tax Cuts And Jobs Act, Jeffrey A. Maine, John A. Miller

Faculty Publications

On December 17, 2017, Congress passed the Tax Cuts and Jobs Act (TCJA). Among its many impacts, the TCJA increased the inflation-adjusted estate tax basic exclusion amount to $10,000,000 on a temporary basis. This has dramatic implications for many existing and future estate plans, including a major crossover impact on income tax planning. In this Article, we explain the operation of the federal wealth transfer taxes (the estate tax, the gift tax, and the generation skipping transfer tax) in the wake of the TCJA and dissect the basic tax planning techniques for wealth transmission. The overall design of this Article …

Afterlife Of The Death Tax, Samuel D. Brunson

Faculty Publications & Other Works

More than a century ago, Congress enacted the modern estate tax to help pay for World War I. Unlike previous iterations of the estate tax, though, this one outlived the war and accumulated additional goals beyond merely raising revenue. The estate tax helped ensure the progressivity of the tax system as a whole, and it limited the hereditary ability to accumulate wealth.

This modern estate tax almost instantly met with opposition, though. The opposition has never been sufficient to entirely eliminate the estate tax, but it has severely weakened its ability to raise revenue and to prevent the accumulation of …

Valuation, Values, Norms: Proposals For Estate And Gift Tax Reform, Bridget J. Crawford

Elisabeth Haub School of Law Faculty Publications

In their contributions to this Symposium, Professor Joseph Dodge, Professor Wendy Gerzog, and Professor Kerry Ryan offer concrete proposals for improving the existing estate and gift tax system. Professor Dodge and Professor Gerzog are especially interested in accuracy in valuation, and advance specific proposals with respect to split-interest transfers and family limited partnerships. Professor Dodge makes an additional proposal to improve the generation-skipping transfer tax system, an understudied area of the law. Professor Gerzog's Symposium contribution draws particular attention to the legal fiction on which the estate and gift tax marital deductions rely. She would restrict the availability of the …

Marital Sharing Of Transfer Tax Exemptions, Kerry A. Ryan

All Faculty Scholarship

This Article analyzes portability and its antecedents in order to distill a positive account of marital sharing oftransfer tax exemption amounts. Prior to 2010, the estate and gift tax exemption equivalent was a nontransferable, separate tax attribute of each spouse. A spouse could only access his or her spouse’s effective exemption by shifting property into the other spouse’s tax base. With the enactment of portability, Congress decoupled tax-free availability of a spouse’s unified credit from the necessity of a prior intra-spousal transfer. All that is required is an election by the decedent spouse, via the executor, to share the decedent’s …

Why Tax Wealth Transfers?: A Philosophical Analysis, Jennifer Bird-Pollan

Law Faculty Scholarly Articles

The one-hundredth anniversary of the estate tax provides an ideal moment to reflect on the role of wealth transfer taxation in the larger scheme of the U.S. tax system. Wealth and income inequality are at historically high levels, and the responses to these issues are often reduced to a simplistic political dichotomy of “right” versus “left.” The multitude of views of the American people cannot be reduced to such simple generalities without losing important nuances. This Article identifies three general categories of political philosophical viewpoints that are commonly endorsed by both politicians and everyday Americans, and then examines the current …

Toward A Reality-Based Estate Tax, Wendy C. Gerzog

All Faculty Scholarship

Currently, the estate tax does not accurately value the property and transactions that it is meant to cover. Additionally, the marital and charitable deductions do not reflect actual associated transfers, instead skewing their benefits away from their purported beneficiaries. This Article proposes reforming the estate tax by eliminating these sources of unreality and distortion, and to make the current estate tax a reality-based tax. Through six specific proposals, the Article identifies solutions to the problems associated with testamentary transfers, puts forth alternative methods of valuation to prevent gaming of transfer taxes, and offers significant modifications to two deduction provisions.

"Death Tax" Politics, Michael J. Graetz

Faculty Scholarship

In his Keynote Address "Death Tax" Politics at the October 2, 2015 Boston College Law School and American College of Trust and Estate Counsel Symposium, The Centennial of the Estate and Gift Tax: Perspectives and Recommendations, Michael Graetz describes the fight over the repeal of the estate tax and its current diminished state. Graetz argues that the political battle over the repeal of the estate tax reflects a fundamental challenge to our nation's progressive tax system. This Address concludes that a revitalized estate tax is important for managing the national debt and reducing massive inequalities in wealth.

Controversies In Tax Law: A Matter Of Perspective (Introduction), Anthony C. Infanti

Book Chapters

This volume presents a new approach to today’s tax controversies, reflecting that debates about taxation often turn on the differing worldviews of the debate participants. For instance, a central tension in the academic tax literature — which is filtering into everyday discussions of tax law — exists between “mainstream” and “critical” tax theorists. This tension results from a clash of perspectives: Is taxation primarily a matter of social science or social justice? Should tax policy debates be grounded in economics or in critical race, feminist, queer, and other outsider perspectives?

To capture and interrogate what often seems like a chasm …

Merger Is Indirect Gift In Cavallaro, Kerry A. Ryan

All Faculty Scholarship

In Cavallaro v. Commissioner, the Tax Court held that a merger of two family-owned businesses resulted in a substantial taxable gift. The taxpayers avoided penalties by demonstrating that they relied in good faith on the mistaken advice of competent tax advisers.

Portability, Marital Wealth Transfers, And The Taxable Unit, Bridget J. Crawford

Elisabeth Haub School of Law Faculty Publications

Prior to 2011, the most efficient estate tax planning for married couples required a minimal level of asset equalization. In order to take maximum advantage of all existing wealth transfer tax exemptions and credits, each spouse needed to own, in an estate tax sense, enough assets to be able to fully utilize the estate tax credit or applicable exemption. This changed with the enactment of estate tax portability in the Economic Growth and Economic Recovery and Relief Act of 2011, which became permanent under the American Taxpayer Relief Act of 2012. “Portability” refers to the ability of a surviving spouse …

The Moving Target Of Tax Reform, Karen C. Burke, Grayson M.P. Mccouch

UF Law Faculty Publications

In 2000, Professor William Turnier proposed a package of three reforms to make the estate tax more “equitable” and “taxpayerfriendly.” All of his proposals—allowing a surviving spouse to inherit a deceased spouse’s unused exemption, replacing the state death tax credit with a deduction, and indexing the exemption for inflation—were eventually enacted. Today, the estate tax remains on the books, but changes in rates and exemptions have severely curtailed its role in the larger federal tax system. Income tax rate reductions for capital gains and dividends have further lightened the tax burden on capital income, and international pressure to reduce the …

What's Wrong With A Federal Inheritance Tax?, Wendy G. Gerzog

All Faculty Scholarship

Scholars have proposed a federal inheritance tax as an alternative to the current federal transfer tax, but there are serious flaws with that idea. In existing inheritance tax systems, those problems include: (1) different tax rates and exemptions based on the decedent’s relationship to the beneficiary; (2) the lack of a tax on lifetime gratuitous transfers, including gifts with retained interests or control; and (3) the persistence of most current valuation distortion abuses. In any inheritance tax model, moreover, there would be significantly decreased compliance rates and increased administrative costs because by focusing on the transferees instead of the transferor, …

Van Alen: A Reasonable Consistency, Wendy G. Gerzog

All Faculty Scholarship

In Van Alen, the Tax Court held that the duty of consistency required that two of the decedent’s children use the section 2032A basis valuation figures to determine gain on the sale of their interest in the decedent’s ranch, which was left to them in trust. The siblings had argued that their stepmother erroneously completed their father’s estate tax return.

Valuation Lessons From Estate Of Adell, Kerry A. Ryan

All Faculty Scholarship

In Estate of Adell, the Tax Court determined that the correct value of a decedent’s interest in a closely held corporation was the figure reported on the original estate tax return. The court rejected alternative values as either using the incorrect valuation method or failing to account for the significant value of a key employee’s personal goodwill.

Tax Court Sends Message On Valuation In Richmond, Kerry A. Ryan

All Faculty Scholarship

In Estate of Helen P. Richmond, the Tax Court determined the proper value for estate tax purposes of a minority interest in a family-owned corporation holding mostly appreciated securities. The court also sustained an accuracy-related penalty against the estate, finding that it used an unsigned draft report by a noncertified appraiser as the basis for the stock valuation reported on Form 706.

Why The Buffett-Gates Giving Pledge Requires Limitation Of The Estate Tax Charitable Deduction, Edward A. Zelinsky

Articles

The Buffett-Gates Giving Pledge, under which wealthy individuals promise to leave a majority of their assets to charity, is an admirable effort to encourage philanthropy. However, the Pledge requires us to confront the paradox that the federal estate tax charitable deduction is unlimited while the federal income tax charitable deduction is capped. If a Giving Pledger leaves his wealth to charity, the federal fisc loses significant revenue since the Pledger thereby avoids federal estate taxation as charitable bequests are deductible without limit for federal estate tax purposes. Despite its laudable qualities, the Giving Pledge is a systematic (albeit inadvertent) threat …

Tax Recognition, Barry Cushman

Journal Articles

This article was prepared for the St. Louis University Law Journal’s “Teaching Trusts & Estates” issue. Many law students take a course in Trusts & Estates, but comparatively few enroll in a class devoted to the federal wealth transfer taxes. For most law students, the Trusts & Estates course provides the only opportunity for exposure to some of the basic features of the estate tax, the gift tax, the generation-skipping transfer tax, and some related features of the income tax. The coverage demands of the typical Trusts & Estates course do not allow for intensive discussion of these issues, but …

Valuing Fractional Interests In Art For Estate Tax Purposes, Wendy G. Gerzog

All Faculty Scholarship

It is difficult to value fractional interests in art because there is virtually no market in those interests. Nevertheless, the Tax Court in Estate of Elkins valued the decedent’s fractional interests in multiple artworks, which the decedent and his children highly cherished. First, the court addressed the restricted agreements under section 2703 and then the court determined the value of decedent’s interests in the art.

When Sommers Are Winters: Do Blanks Denote Revocability?, Wendy G. Gerzog

All Faculty Scholarship

In Sommers, ruling on both parties’ motions for partial summary judgment, the Tax Court dealt with claims of issue preclusion and collateral estoppel, equitable apportionment, the completion of gifts of limited liability company interests, and retained powers that would cause estate tax inclusion.

Two aspects of Sommers held particular interest for me. The first is that the parties appear to be arguing their opponent’s conventional position. The second is that the court grappled with whether the blanks left in the gift documents were immaterial to gift completion; however, the court did not address whether the decedent’s completed gifts qualified for …

Kite: Irs Wins Qtip Battle But Loses Annuity War, Kerry A. Ryan

All Faculty Scholarship

In Kite, the Tax Court held that a 10-year deferred annuity constituted adequate and full consideration for a transfer of family partnership interests, even though the transferor died before receiving any payments. The court also held that the liquidation of a qualified terminable interest property trust and subsequent sale of its assets constituted a disposition of the qualifying income interest for life, resulting in a deemed transfer of the entire trust under section 2519. Ryan discusses those holdings and two more issues that were not raised in the Tax Court proceeding but are clearly implicated by the Kite facts.

Death, Taxes, And Property (Rights): Nozick, Libertarianism, And The Estate Tax, Jennifer Bird-Pollan

Law Faculty Scholarly Articles

The primary purpose of this Article is to dispute the moral claims to post-death property rights made by libertarians when they argue against the estate tax. As I will show later in this Article, my argument does not necessarily entail enacting an estate tax, nor does it require a particular level of tax. I am merely trying to demonstrate that those who argue that the estate tax is an immoral violation of the private property rights of the deceased are mistaken. This is not to say that the estate of the deceased should necessarily pass to the government. It is …

Not All Defined Value Clauses Are Equal, Wendy G. Gerzog

All Faculty Scholarship

Defined value clauses used to value nonmarketable family limited partnership (FLP) interests create valuation distortions and other public policy issues. This paper describes these abuses and proposes the employment of restrictions similar to those applied to pecuniary formula marital deduction clauses.

The article explains how pecuniary formula marital deduction provisions created valuation distortions by allowing for undervaluation of the marital share that were remedied by the IRS’s Rev. Proc. 64-19 and the enactment of section 2056(b)(10). The article analyzes recent case law expanding the use of defined value clauses into the FLP area and criticizes the courts for not applying …

Boomer-Ang Eldercare: Deductible Claim?, Wendy G. Gerzog

All Faculty Scholarship

In this article, Gerzog discusses Estate of Olivo, in which the Tax Court determined the deductibility under section 2053 of a claim against the decedent’s estate for eldercare services provided by a family member.

The New Super-Charged Pat (Power Of Appointment Trust), Wendy G. Gerzog

All Faculty Scholarship

This article proposes to repeal the QTIP provisions in order to collect revenue now for transfers that are essentially transfers to third parties and not to the decedent's spouse. Because there are advantages of increased flexibility attendant to a QTIP as opposed to a PAT, this article proposes to take those repealed QTIP benefits and attach them to the PAT, which would greatly enhance that marital deduction trust form. A super-charged PAT would thereby be able to preserve the decedent's GST tax exemption (like a reverse QTIP), create a decedent's by-pass trust by allowing a PAT (or a partial PAT) …

Shapiro: Palimony And The Estate Tax, Wendy G. Gerzog

All Faculty Scholarship

In Estate of Shapiro, the Ninth Circuit held that an individual had a valid palimony claim under Nevada state law. However, the issue was whether the decedent’s estate qualified for a deduction for that claim under federal estate tax law.

Morgens: More Qtip Mischief, Wendy G. Gerzog

All Faculty Scholarship

In Morgens, the court ruled in favor of the government that section 2035(b) applied to the gift taxes paid by the qualified terminable interest property (QTIP) trust beneficiaries to gross up the widow’s estate by that amount. Because the surviving (or donee) spouse must be taxed on the underlying property over which she has no ownership rights, Congress enacted section 2207A to allow the second spouse to recover from the beneficiaries of the property the transfer taxes relating to her gift or estate inclusion. However, the court held that section 2207A did not shift the gift tax liability to those …

Flp In The Black, Wendy G. Gerzog

All Faculty Scholarship

In Estate of Black, because the Tax Court held the Blacks' transfers fell within the bona fide sales exception of section 2036, they were successful at avoiding the application of the provision. Thus, they were able to obtain valuation discounts for their transfers of property (mostly marketable securities) to their son and grandchildren. The court also decided the marital trust funding valuation date issue in the executor's favor and allowed almost half of the claimed administrative expense deductions.

The Times They Are Not A-Changin': Reforming The Charitable Split-Interest Rules (Again), Wendy G. Gerzog

All Faculty Scholarship

The article reviews the history of the tax treatment of charitable split interest gifts, explains the inequities that Congress both cured and generated in its 1969 reforms, and proposes solutions that are consistent with the goals of the 1969 legislation. The article discusses variations in the 1969 definition of a charitable split interest, which, because of the enacted statutory language, applies in instances where there is no abuse potential. The inequity produced by that definition penalizes the donor and flouts the rationale behind the 1969 legislation. By contrast, the creation of some required statutory forms of charitable split interests in …

E-Vat: An Electronically Collected Progressive Consumption Tax, Daniel S. Goldberg

Faculty Scholarship

This report proposes replacing the income tax with an electronic, progressive consumption tax that couples a credit-method VAT (modified for wages) with a progressive wage tax. I have called this proposal e-VAT (a convenient contraction for an electronic value added tax), because it is based on a business-level-credit VAT and can be collected automatically and electronically at the point of sale.

The essential advantage of e-VAT over the Hall-Rabushka flat tax is that e-VAT’s use of a credit VAT as its foundation facilitates automatic and electronic collection of the tax. A credit VAT lends itself to electronic monitoring and auditing …