Law Commons^™

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 …

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.