A federal court ruled, in a case of first impression, that a widow who committed suicide after her husband was killed in the 2001 World Trade Center attack does not qualify as a victim of terrorism and therefore her estate does not qualify for the reduced estate tax rates under Sec. 2201(c).
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TOPICS
Taxation of Estates & Trusts
The Case for an Intentionally Defective Grantor Trust
An IDGT is an effective estate-freezing tool that provides the opportunity to maintain the maximum control over the beneficial enjoyment of the transferred assets.
Funeral Trust Dollar Limitation Repealed
The Hubbard Act, P.L. 110-317, repealed the dollar limitation on funeral trusts.
Riding the Estate Planning Roller Coaster for the Next Three Years
As 2010 approaches, tax legislators and policy makers are sharply divided on a more permanent approach to taxing the transfer of wealth from one generation to the next.
Using Debt to Leverage a Taxable Gift to a QPRT
A qualified personal residence trust is a trust created to own a personal residence of the grantor for the benefit of the grantor’s spouse, children, or charity. The grantor makes a gift of a personal residence into the trust while retaining a right to occupy the residence for a term of years.
Guidance Issued on Dividing CRTs, Assisting Divorcing Couples
The IRS recently issued Rev. Rul. 2008-41, confirming that charitable remainder trusts (CRTs) can be divided into separate but equal trusts for each recipient without adverse tax consequences.
Significant Recent Developments in Estate Planning
This article examines developments in estate, gift, and generation-skipping transfer tax planning and compliance between June 2007 and May 2008.
IRS Issues Proposed Ruling on Private Trust Companies
The IRS is seeking comments from the public on a proposed ruling regarding the use of family-owned private trust companies (PTCs) as trustees of trusts. Fact Patterns in the Proposed Ruling The proposed ruling presents two situations. Situation 1 involves a PTC formed under laws of a state that has
Qualifying a Marital Deduction Trust as an Eligible S Shareholder
The marital deduction permits the estate of the spouse who dies first to claim an estate tax deduction for property passing to the surviving spouse if certain requirements are met.
How Will Final Regs. Apply the Knight “Commonly Incurred” Test?
In Knight, the Supreme Court held that under Sec. 67(e), a trust expense otherwise subject to the 2% of AGI floor is fully deductible under the exception in Sec. 67(e) only if it would be uncommon for an individual holding the same property to incur the expenses.
Prop. Regs. Ease UBTI Consequences for CRTs
The Service has issued proposed regulations to reflect the change made by TRAHCA to impose a 100% excise tax on the unrelated business taxable income (UBTI) of charitable remainder trusts (CRTs) that have UBTI.
IRS Issues Prop. Regs. in Response to Kohler Case
The IRS has issued proposed regulations clarifying that under Sec. 2032 an estate may take into account a reduction in the value of the gross estate following the decedent’s death in determining the value of the estate on the alternate valuation date if the reduction is due to market conditions but not other post-death events.
Handling Gifts and Bequests of LLC Interests
The gift of an LLC interest generally does not result in the recognition of gain or loss by the donor or the donee.
Interim Guidance Issued on Unbundling Trustee Fees
The IRS announced that for tax years beginning before January 1, 2008, nongrantor trusts and estates will not be required to unbundle their fiduciary fees to determine what portion is subject to the Sec. 67(a) 2% threshold for itemized deductions.
Impact of the Supreme Court’s Knight Decision on Investment Advisers
The Supreme Court held that deductible investment fees incurred by a trust or estate are subject to the 2% miscellaneous deduction floor unless they are fees of a type that individuals would not commonly or customarily incur.
Supreme Court Holds Investment Advisory Fees Are Subject to 2% Floor
The Supreme Court held that investment advisory fees are generally subject to the 2% floor but refused to go as far as the Second Circuit in saying that the exclusivity test requires that the fees could not have been incurred by an individual.
The Ongoing Sec. 67(e) Controversy and the New Preparer Penalties
This item discusses how the 2% floor affects a trust’s regular tax and alternative minimum tax (AMT), the effect of the recent Supreme Court decision in Knight on the continuing controversy, and the efficacy of the proposed regulations in the wake of the Knight decision.
Substantial Compliance Insufficient to Allow Charitable Deduction
The Seventh Circuit has held that the doctrine of substantial compliance would not allow a trust to take a charitable deduction where the trustee had intended, but failed, to reform the trust as a charitable remainder unitrust.
Special Issues Related to Distributions of Partnership Interests by Estates and Trusts
The complex rules governing the tax treatment of distributions from estates and trusts are further complicated when a partnership interest is distributed.
Service Changes Policy on Estate Tax Installment Payments
The Service will determine on a case-by-case basis whether security will be required when a qualifying estate elects under Sec. 6166 to pay all or a part of the estate tax in installments.
employee benefits & pensions
Profits interests: The most tax-efficient equity grant to employees
By granting them a profits interest, entities taxed as partnerships can reward employees with equity. Mistakes, however, could cause challenges from taxing authorities.
