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 …

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 …

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.

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 …

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.

The Taxation Of A Gift Or Inheritance From An Employer., Douglas A. Kahn

Articles

The focus of this article is to examine the following questions: 1. whether, despite its unrestricted language, section 102(c) does not apply to some gratuitous transfers to an employee; 2. if so, what are the exceptions to section 102(c); and 3. when section 102(c) does not apply to a transfer, whether it will be excluded from income. Part II of this article examines the conditions under which a gratuitous transfer to an employee will be excluded from income under the Duberstein standard and under the normal tax treatment of testamentary transfers -- in other words, how the section 102(a) gift …

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 …

The Funding Of Children's Educational Costs, Douglas A. Kahn

Articles

A plan for reduction of educational costs should take federal transfer taxes into account. The method chosen for reducing income tax liability usually will involve making gifts. To the extent that it is convenient to do so, the transfer tax consequences of making such gifts should be minimized. This article will examine the estate and gift tax consequences of the income tax reduction arrangements described herein and will consider means of structuring the transactions so as to minimize those consequences.

Transactions Subject To Gift Tax, Douglas A. Kahn, Earl M. Colson

Articles

The gift tax is imposed on the "transfer of property by gift." The term gift is not expressly defined either in the Code or in the Treasury Regulations. However, section 2512(b), dealing with the valuation of gifts, states that "where property is transferred for less than an adequate and full consideration in money or money's worth," the difference between the value of the property transferred and the consideration received constitutes a gift. Thus, for gift tax purposes, the determination of whether a gift was made does not turn so much on the intent of the transferor as it does on …

Recent Developments In Gift And Estate Taxation, Douglas A. Kahn

Other Publications

A summarization of recent tax cases.

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 …

A Guide To The Estate And Gift Tax Amendments Of 1970, Douglas A. Kahn

Articles

The Excise, Estate, and Gift Tax Adjustment Act of 1970 [Pub. L. No. 91-614 (Dec. 31, 1970) made a number of amendments to the federal estate and gift tax laws. The estate tax laws were amended to shorten the period of time for filing estate tax returns and for the alternate valuation date and for several related items. In addition, for income tax purposes, the holding period of property that was included in a decedent's gross estate and that was acquired from the decedent was altered; and fiduciaries were granted additional means of obtaining a discharge of their personal liability …

Transactions Subject To The Federal Gift Tax, Douglas A. Kahn

Articles

The federal gift tax was first enacted in 1924, approximately eight years after the adoption of the estate tax. As originally enacted, the tax was largely ineffective because it was computed on an annual basis without regard to gifts made in prior years.

Joint Tenancies And Tenancies By The Entirety In Michigan—Federal Gift Tax Considerations, Douglas A. Kahn

Articles

The establishment of joint tenancy' ownership of property, or the termination of such a tenancy, may have federal gift tax consequences to the co-owners of the property. Consequently, the gift tax is a factor to be weighed before embarking on either of these ventures. The gift tax consequences are determined by the nature of the property rights enjoyed by the joint tenants under the controlling state property law, and accordingly it is desirable, where Michigan property law is applicable, to consider the Michigan law and the significance of that law to the operation of the gift tax. However, before discussing …

Income Tax Aspects Of Gifts And Leasebacks Of Business Property In Trust, William W. Oliver

Articles by Maurer Faculty

Rental deductions for a grantor who transfers property used in his business into a short term trust and then leases it back have been at issue in three recent cases, with the deduction being denied in two of the three cases. Some of the concepts used by the courts in these cases are of doubtful help in analyzing the problems, and there is a need for further clarification before tax consequences can be predicted with a reasonable degree of assurance. There is a possibility that the income will be taxed to the trust, even though a deduction is denied the …

State And Federal Taxation: Gifts To Or For Minors, Byron E. Bronston

Articles by Maurer Faculty

No abstract provided.

Tax Problems Of Revocable Trusts, Byron E. Bronston

Articles by Maurer Faculty

No abstract provided.