Tax Law Commons^™

Trust Alteration And The Dead Hand Paradox, Jeffrey N. Pennell, Reid Kress Weisbord

ACTEC Law Journal

Trusts are popular instruments for wealth transmission because they can be crafted to suit almost any imaginable estate planning goal that is not contrary to public policy. With the abrogation of the Rule Against Perpetuities in most states, settlors may impose trust terms that will be legally enforceable for scores of future generations, if not in perpetuity. Long-term and perpetual trusts, however, present a paradox of dead hand control, because the specificity and the durability of settlor-imposed restrictions tend to be inversely related. As donative preferences become increasingly specific and restrictive, trusts become less durable with the passage of time, …

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 …

Foreword -- The Supreme Court's Estate Planning Jurisprudence, Bridget J. Crawford

ACTEC Law Journal

This short essay introduces a special issue of the ACTEC Law Journal devoted to the estate planning jurisprudence of the Supreme Court of the United States. The issue includes two invited essays on the role of the court in developing the law in this area, as well as commentaries on seventeen of the most important estate planning-related cases decided by the Supreme Court between 1925 and 2013.

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 …

Untangling The Strings: Transfer Taxation Of Retained Interests And Powers, Matthew A. Reiber

Akron Law Review

This Article takes a more sanguine approach: it acknowledges the utility of certain portions of these provisions to a functioning transfer tax system, but ultimately concludes that the current statutory scheme is overbroad in reach, clumsy in application, and therefore should be replaced with a single, stand-alone provision. Such a provision would require inclusion of property irrevocably transferred during life in which (a) the transferor retains an economic interest in the property, such as the right to use the property or to receive the income generated by the property, (b) the transferor pays gift tax at the time of transfer …

Individual, Couple Or Family? The Unit Of Taxation For Transfer Tax Purposes: A Shifting Focus, Anne-Marie Rhodes

Akron Law Review

This paper examines the shifting focus of the transfer tax system from the perspectives of the articulated primary purpose for the taxes and the appropriate unit of taxation given that purpose. The historical progression shows that as a sense of purpose became less clear, the unit of taxation similarly became less focused.

Tax Reform Proposals On A Gift Tax On The Transfer Of Property By Nonresidents, Daze Swift Lee

University of Massachusetts Law Review

This Note raises taxation issues pertaining to a gift tax on the transfer of property by nonresidents under current United States tax rules. It further illustrates patterns and trends to evade a gift tax using transaction maneuvers. These issues are defined in three categories: a gift tax on the transfer of property situated only within the United States by a nonresident, no gift tax on the transfer of intangible assets, and transferee liability. In response to such issues, this Note calls for corresponding proposals to resolve gift taxation problems. It proposes that a gift tax should be imposed on the …

A Simpler Verifiable Gift Tax, Wendy G. Gerzog

All Faculty Scholarship

The purpose of this article is to propose a simpler verifiable gift tax, to reassert basic principles of transfer taxes, to encourage simple, outright gifts, and to eliminate some of the major abuses in the current gift tax regime. To accomplish these goals, the proposed tax would simplify gift completion rules, adopt a hard-to-complete rule of transfer taxation, reduce the annual exclusion while expanding the consumption exclusion, and employ loss of preference inducements to increase gift tax compliance.

Family Limited Partnerships: Discounts, Options, And Disappearing Value, Karen C. Burke, Grayson M.P. Mccouch

Karen Burke

Family partnerships have been become increasingly popular as a means of avoiding estate and gift taxes. As other estate freezing techniques have been closed off by statutory anti-abuse rules, estate planners have increasingly resorted to partnerships as a vehicle for transferring assets within a family at deeply discounted values. Discounts ranging from one-third to over one-half of the value of the underlying assets are routinely claimed, and often allowed, based on lack of marketability and lack of control, even where these disabilities have no lasting or ascertainable economic effect. Nevertheless, the use of family partnerships to suppress value for transfer …

Family Limited Partnerships: Discounts, Options, And Disappearing Value, Karen C. Burke, Grayson M.P. Mccouch

Grayson McCouch

Family partnerships have been become increasingly popular as a means of avoiding estate and gift taxes. As other estate freezing techniques have been closed off by statutory anti-abuse rules, estate planners have increasingly resorted to partnerships as a vehicle for transferring assets within a family at deeply discounted values. Discounts ranging from one-third to over one-half of the value of the underlying assets are routinely claimed, and often allowed, based on lack of marketability and lack of control, even where these disabilities have no lasting or ascertainable economic effect. Nevertheless, the use of family partnerships to suppress value for transfer …

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 …

Recent Legislative Changes As To The Reporting And Payment Of The Gift Tax: A Step Toward Tax Simplification, Harry F. Byrd Jr.

Pepperdine Law Review

The overly complex nature of the nation's tax laws has spurred congressional action to simplify the tax code. United States Senator Harry F. Byrd, Jr. has demonstrated his commitment toward this goal by his recent introduction of the Annual Gift Tax Return Act. This measure, enacted as part of the Economic Recovery Tax Act of 1981, provides a return to the system of annual gift tax reporting. More significantly, it demonstrates that simplification of the tax laws can be achieved without sacrificing other goals, and without additional costs to the taxpayer.

Wimmer Wins Flp Annual Exclusions, Wendy G. Gerzog

All Faculty Scholarship

In Wimmer, the Tax Court held that the income stream from a taxpayer’s gifts of family limited partnership interests was eligible for the annual exclusion. By comparing the income interest in the partnership’s dividend paying marketable securities to the income interest in a trust, the court made Wimmer a winner. But does the opinion logically lead to that conclusion?

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 …

Wandering Far Afield With Defined Value Clauses, Wendy G. Gerzog

All Faculty Scholarship

The Wandry decision extends the application of defined value clauses beyond those family limited partnership cases that transfer any excess value to a charity. In Wandry, the Tax Court reads Procter narrowly and ignores the fundamental rationale of Robinette.

Defined Value Clauses And Fair Market Value, Wendy G. Gerzog

All Faculty Scholarship

In Hendrix the Tax Court considered the issues of whether defined value clauses were the result of arm’s-length transactions and whether they were void as against public policy. The underlying dispute was whether the taxpayers’ transfers of the John H. Hendrix Co. stock were valued at fair market value. With a decision favoring the taxpayers, the defined value clauses in both McCord and Hendrix impede the accurate valuation of taxable gifts to family members and of deductible charitable gifts.

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) …

Linton Reversed: Indirect Gifts And The Step Transaction Doctrine, Wendy G. Gerzog

All Faculty Scholarship

The Ninth Circuit recently reversed the district court’s summary judgment in favor of the government in Linton on the issues of indirect gift and the applicability of the step transaction doctrine. The circuit court’s analysis focused on the taxpayers’ donative intent. With that emphasis, the Ninth Circuit remanded the case to the district court to determine the sequence of the relevant transactions.

I Dig It, But Congress Shouldn't Let Me: Closing The Idgt Loophole, Daniel L. Ricks

ACTEC Law Journal

By combining three tools that independently are beneficial to taxpayers, clever estate planners have devised a transaction - the installment sale of discounted assets to an intentionally defective grantor trust - that saves their ultra-wealthy clients millions of dollars in estate and gift taxes. This transaction, which is a foundational part of many estate plans, takes advantage of rules that Congress never intended to be used in this way. Becasue the Internal Revenue Service has conceded its inability to challenge the transaction based on current law, any solution lies with Congress. This Article proposes an amendment to § 2036 that …

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 …

Check-The-Box Regs And Gift Tax Discounts, Wendy G. Gerzog

All Faculty Scholarship

This article discusses the recent Tax Court decision in Pierre and the effect for gift tax purposes of an entity’s classification made under the check-the-box regulations. The court was split on what those regulations mean when they state that an entity is to be disregarded ‘‘for federal tax purposes.’’

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 …

Valuation Discounting Techniques: Terms Gone Awry, Wendy G. Gerzog

All Faculty Scholarship

Fair market value is defined in the section 2031 Regulations. For its validity, that definition of fair market value relies on the normal definitions of its significant terms: a seller is someone who is seeking the highest price for her product and a buyer is someone who wants to obtain the lowest price for his purchase. It is only that tension that creates the realistic, and fair, market value of that asset. Indeed, without that conflict, the definition is comprised of hollow words.

In the context of family limited partnerships, terms have been misused. By utilizing the limited partnership shell, …

From The Greedy To The Needy, Wendy G. Gerzog

All Faculty Scholarship

In some instances when the taxpayer makes a charitable donation, the loss of revenue to the government, and the corresponding gain to the taxpayer, far exceeds the benefit to the charity. Some of these losses may be generated by government sanctioned complex transactions and even government created devices. This article proposes a new way to examine "quid pro quo" charitable gifts that reflects the rationale for the charitable deduction.The article analyzes various charitable donations in terms of the dollars gained by the taxpayer, the dollars lost by the government, and the dollars received by the charity. After considering a sliding …

Family Limited Partnerships: Discounts, Options, And Disappearing Value, Karen C. Burke, Grayson M.P. Mccouch

UF Law Faculty Publications

Family partnerships have been become increasingly popular as a means of avoiding estate and gift taxes. As other estate freezing techniques have been closed off by statutory anti-abuse rules, estate planners have increasingly resorted to partnerships as a vehicle for transferring assets within a family at deeply discounted values. Discounts ranging from one-third to over one-half of the value of the underlying assets are routinely claimed, and often allowed, based on lack of marketability and lack of control, even where these disabilities have no lasting or ascertainable economic effect. Nevertheless, the use of family partnerships to suppress value for transfer …

Sales Of Remainder Interests: Reconciling Gradow V. United States And Section 2702, Martha W. Jordan

Martha W. Jordan

This article seeks to answer the question of whether the sale of a remainder interest for its actuarial value is exempt from transfer tax. Generally, when a taxpayer sells property for its fair market value, the taxpayer has been adequately compensated and, therefore, should not be subject to transfer tax. The sale of a remainder interest, however, raises various questions that are not present when property is sold outright. The sale of a remainder interest divides the underlying property into two split-interests: the remainder interest and the retained or present interest. The fair market value of split-interests is commonly determined …

The Changing Meaning Of "Gift": An Analysis Of The Tax Court's Decision In Carson V. Commissioner, Jeffrey Schoenblum

Vanderbilt Law Review

This Article will focus on the Carson case in an effort to identify the emerging meaning, if any, of gift. Following a consideration of the factual background of the case in Part II, Part HI will analyze critically and in-depth each of the five Carson opinions in an effort to decipher the various currents at play and any common ground that may still be shared by a majority of the court. Finally, Part IV will consider the decision's likely consequences and the long-term prospects for a settled meaning for gift, one that is not only workable, as is the case …

Implications Of Minority Interest And Stock Restrictions In Valuing Closely-Held Shares, Alan L. Feld

Faculty Scholarship

The federal estate and gift taxes levy on the gratuitous transfer of wealth by both testamentary and lifetime disposition. The amount of the tax depends on the value placed on the property transferred by the decedent or donor. When the property transferred consists of shares of stock in a closely held corporation, there often exists no ready market to help in valuation. As a result, the value of the shares used to compute the federal estate or gift tax must be determined first by appraising the value of the enterprise, and then by allocating some portion of that value to …

Taxation - Federal Income Tax - Right Of Donee To Deduct Expense Of Contesting Gift Tax Asserted Against Donor, William J. Wise S.Ed.

Michigan Law Review

ln 1948 taxpayer's mother gave him 410 shares of stock in the family enterprise. She filed a gift tax return, but the government, in auditing it, disagreed with her valuation of the stock. Donor had no desire to contest the government's valuation, but since his mother and father still held substantial stock in the business which would eventually go to him, donee desired a lower valuation for estate tax evidentiary purposes. Allegedly fearing personal liability for any deficiency assessed against his mother as well as a lien against the corpus of the gift for any unpaid tax, he decided to …

Tax Problems Of Revocable Trusts, Byron E. Bronston

Articles by Maurer Faculty

No abstract provided.