National Association of Estate Planners and Councils

July, 2012 Newsletter
Provided by Leimberg Information Services

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Gassman, Crotty, Denicolo & Pless: Wondering and Wandering through the World of Wandry and Formula C

“There are no cases known to the authors that discuss whether a valuation safety clause provided under an irrevocable trust will be considered as ineffective to prevent gift tax from being imposed, but it seems unjust that a responsibly drafted provision would not be given full effect where a taxpayer has conscientiously attempted to provide the appropriate value and has simply determined it best that a specified dollar amount or formula deterrent threshold would be set aside for descendants, with any values and excess thereof to be held as a marital devise or a charitable devise. Given the possibility that a valuation adjustment clause in a trust document would be respected, why not use them?”

Now, Alan Gassman, Ken Crotty, Chris Denicolo and Erica Pless provide members with their thoughts on how the Wandry case will impact the use formula clauses. Their commentary reviews the relevant cases and provides an analysis of techniques that can guide planners on the use of valuation adjustment clauses.

Alan S. Gassman, J.D., LL.M. practices law in Clearwater, Florida. Each year he publishes numerous articles in publications such as BNA Tax & Accounting, Estate Planning, Trusts and Estates, The Journal of Asset Protection, and Steve Leimberg’s Asset Protection Planning Newsletters. Mr. Gassman is a fellow of the American Bar Foundation, a member of the Executive Council of the Tax Section of the Florida Bar, and has been quoted on many occasions in publications such as The Wall Street Journal, Forbes Magazine, Medical Economics, Modern Healthcare, and Florida Trend magazine. He is an author, along with Kenneth Crotty and Christopher Denicolo, of the BNA Tax & Accounting book Estate Tax Planning in 2011 and 2012. He is the senior partner at Gassman Law Associates, P.A. in Clearwater, Florida, which he founded in 1987. His email address is agassman@gassmanpa.com

Kenneth J. Crotty, J.D., LL.M., is a partner at the Clearwater, Florida law firm of Gassman Law Associates, P.A., where he practices in the areas of estate tax and trust planning, taxation, physician representation, and corporate and business law. Mr. Crotty has co-authored several handbooks that have been published in BNA Tax & Accounting, Estate Planning, Steve Leimberg’s Estate Planning and Asset Protection Planning Newsletters and Estate Planning magazine. He, Alan Gassman and Christopher Denicolo are the co-authors of the BNA book Estate Tax Planning in 2011 & 2012. His email address is ken@gassmanpa.com.

Christopher J. Denicolo, J.D., LL.M. is an associate at the Clearwater, Florida law firm of Gassman, Bates & Associates, P.A., where he practices in the areas of estate tax and trust planning, taxation, physician representation, and corporate and business law.

Erica Pless, J.D. obtained her bachelor degree from Eckerd College, with high honors, and her law degree from Stetson University College of Law, cum laude. Her practice has focused primarily on federal and state tax controversies. She is currently pursuing an LL.M. in Taxation from the University of Alabama School of Law. Her email address is erica@theplesslawfirm.com.

Here is their commentary:

EXECUTIVE SUMMARY:

Estate tax planner can have more confidence and now have better guidance on the use of valuation adjustment clauses with the issuance of the Wandry decision that was released by the tax court on March 26th. This is a tax memorandum decision, but it provides significant guidance and builds upon prior cases that make it clear that the IRS will have problems trying to set aside appropriately structured valuation adjustment mechanisms.

Over the past few years, taxpayers have consistently defeated IRS attempts to invalidate formula clauses used in gifting documents. The most recent case, Wandry v. Commissioner provides planners with additional incentive and confidence to start using and relying on valuation clauses as an essential estate planning tool. This article will address the relevant cases and provide an analysis to guide planners who are wondering and wandering through the world of formula clauses. This commentary will review the relevant cases and provide an analysis and a discussion of techniques that can guide planners on the use of valuation adjustment clauses.

FACTS:

Obviously, clients making large gifts or engaged in family sale arrangements would like to have assurances that they will not be required to pay federal gift tax or generation skipping tax as the result of transfers made to family members or irrevocable trusts. The advantages of these transfers or sales are significant, and the results can be much better where planners and clients have confidence that there is little likelihood of sustaining an unintended tax because of valuation issues.

Clients making large gifts like to have assurances that they will not be required to pay federal gift tax as the result of such transfers. Unexpected gift tax can result from the denial of valuation discounts associated with the gift itself, or a finding that prior gifting for family transactions caused reductions in the client=s gift tax exemption that was otherwise assumed to exist.

It therefore makes good sense to provide in a transfer or trust document that any amount being transferred that would exceed what can pass free of gift tax would either not be considered to have been transferred, would adjust any amount paid or payable as the result of the transfer, or would pass to charity under a marital deduction clause or back to the original transferor in some manner.

The IRS has long asserted that valuation adjustment clauses violate public policy and are therefore invalid. The seminal case that the IRS has relied upon for this principle is Commissioner v. Proctor.[i] In the 1944 Proctor case, the Fourth Circuit Court of Appeals reviewed a situation where language in the gift document provided that the gift would be extinguished to the extent found to be taxable (as a Acondition subsequent@) and held as follows:

 

The "Proctor clause" was found to violate public policy based on the following three conclusions:

· The clause discouraged the collection of the tax because collection efforts would undo the gift;

· The clause would "obstruct the administration of justice by requiring the courts to pass upon a moot case;" and

· A judicial ruling on the value of the trust would be a declaratory judgment, because "the condition is not to become operative until there has been a judgment; but after the judgment has been rendered it cannot become operative because the matter involved is concluded by the judgment."[ii]

Before proceeding to explain the history of subsequent valuation adjustment clause cases and the Wandry case as described below, it will be useful for the reader to be familiar with the following terminology:

Defined Valuation Clause. This is a clause whereby a transfer is made of a particular number of shares or percentage of ownership that will be equal to a defined dollar amount.

Example - I hereby give to my son, Dweeb, a number of shares in the company that is worth the amount that I can pass gift tax free taking into consideration my gift tax exemption and prior gifts that I have made.

Prize Adjustment Clause. This is a clause which states an amount paid or Aover gift@ amount will result in a monetary adjustment agreement parties.

 

Example - I give this stock to my son base dupon the assumption they are worth no more than $200,000. If it is worth more than $200,000 then my son, by signing below, agrees to pay me back the difference.

The next valuation adjustment case after Proctor was in King v. U.S., which was decided in 1976. In this case the Tenth Circuit Court of Appeals upheld the District Court=s decision that a price adjustment clause was not a violation of public policy, because the stock was being sold, rather than gifted, and the stock was difficult to value. The Court held that the price adjustment clause was a "proper means of overcoming uncertainty in ascertaining the fair market value of the stock."

In King, the taxpayer and his wife owned stock in a corporation, which owned a series of limited partnerships that conducted wildcat oil and gas activities. The taxpayer and his wife sold stock in the corporation to trusts established by the taxpayer for his descendants, and the sales were memorialized by letter agreements which based the sale price for the stock on the same valuation formula that was used for a qualified stock option plan that the company had. The letter agreements also contained an adjustment clause providing that if the fair market value of the stock as of the date of the sale is ever determined by the IRS to be greater or less than the value determined by the valuation formula, then the purchase price would be adjusted to the fair market value as determined by the IRS. The IRS, citing Proctor, argued that the sole purpose for the adjustment clause was to defeat the imposition of gift tax, and that such clause therefore violates public policy and should be disregarded to cause gift tax to be assessed on the difference between the IRS determined value, and the initial stock sale price. As stated above, the court disagreed with the IRS, and declined to disregard the adjustment clause or to find that gift tax should be assessed. Note that no charitable organizations or other third parties were involved in the sale transaction.

18 years passed after the King decision before another valuation adjustment clause case came to light. Then in 1984, in Harwood v. Commissioner, the taxpayers unsuccessfully used an adjustment clause that read as follows:

In the event that the value of the partnership interest listed in Schedule "A" shall be finally determined to exceed $ 400,000 for purposes of computing the California or United States Gift Tax, and in the opinion of the Attorney for the trustee a lower value is not reasonably defendable, the trustee shall immediately execute a promissory note to the trustors in the usual form at 6 percent interest in a principal amount equal to the difference between the value of such gift and $ 400,000. The note shall carry interest and be effective as of the day of the gift.[iii]

The Court found that the above language did not require the trustees to execute a promissory note and effectively reduce the value of the gift, and therefore held that the savings clause had no effect and did not facilitate avoidance of gift tax. The Court did not discuss public policy [DID IT?].

 

Then, in 1986 the tax court decision in Ward v. Commissioner, struck down an adjustment clause as being contrary.[iv] The gift documents included the following language:

In consideration of love and affection, each Donor does hereby assign to each Donee all of the Donor's right, title and interest in and to twenty-five (25) shares of the capital stock of J-SEVEN RANCH, INC., a Florida corporation, hereinafter called the "Corporation". The parties acknowledge that the computation of the number of shares constituting each gift has been based upon their mutual understanding and belief that the fair market value of each share is $ 2,000.00, resulting in tax liability for each Donor less than the amount of unified credit against gift tax to which the Donor is entitled at this time under applicable provisions of law.Each party hereto agrees that if it should be finally determined for Federal gift tax purposes that the fair market value of each share of capital stock of the Corporation exceeds or is less than $ 2,000.00 an adjustment will be made in the number of shares constituting each gift so that each Donor will give to each Donee the maximum number of full shares of capital stock of the Corporation, the total value of which will be $ 50,000.00 from each Donor to each Donee and a total of $ 150,000 from each Donor to all Donees. Any adjustment so made which results in an increase or decrease in the number of shares held by a stockholder of the Corporation will be made effective as of the same date as this Agreement, and any dividends paid thereafter shall be recomputed and reimbursed as necessary to give effect to the intent of this Agreement.[v]

The Court distinguished this case from King because there was no arm=s length transaction present, and because the agreement had the effect of retroactively altering the amount of a completed gift (condition subsequent).

We then had 17 years of silence and speculation in this area until the case of McCord v. Commissioner was decided in 2003.[vi] The Tax Court, in a full opinion, struck down a formula clause, which provided the following:

 

I hereby assign ____ units of Family Limited Partnership to Trusts for Descendants equal to the fair market value of $______, with the excess going to charity. The fair market value of the assigned interests as of the date of the assignment shall be the price at which the assigned partnership interests would change hands between a hypothetical buyer and a hypothetical seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts.

The Fifth Circuit reversed the tax court and upheld the value adjustment clause stating that the Tax Court's analysis improperly focused on events that occurred after the sale date instead of focusing on the initial transfer documents. [vii] This decision turned the tide in favor of valuation clauses.

In the 2009 case, In re Christiansen, the Eighth Circuit upheld a formula disclaimer, which provided that the amount disclaimed by the decedent's daughter passed to charity. The language utilized was as follows:

I hereby disclaim that portion of the Gift determined by reference to a fraction, the numerator of which is the fair market value of the Gift (before payment of debts, expenses and taxes) on ______, and the denominator of which is the fair market value of the Gift (before payment of debts, expenses and taxes) on _____ ("the Disclaimed Portion"). The fair market value of the Gift (before payment of debts, expenses and taxes) on ____, shall be the price at which the Gift (before payment of debts, expenses and taxes) would have changed hands on _____, between a hypothetical willing buyer and a hypothetical willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts , as such value is finally determined for federal estate tax purposes.[viii]

In 2011, the Petter and Hendrix cases upheld valuation adjustment clauses where significant value has been transferred to independent charities under circumstances that seem to clearly show that the primary purpose of the charitable arrangement was to assure that an IRS induced valuation determination increase would result in more value going to charity as opposed to gift tax dollars being paid.

In the Petter case, the family had been charitable in the past and the charity was a community foundation that the taxpayer had never dealt with before, and the intended combined gift to the foundation was only $100,000, gifted by each spouse, while $4,085,190 of intended value was passing to the trusts for the taxpayer=s descendants by transfer of a certain number of units in a limited liability company that would maximize the taxpayer's unused exclusion amount.

 

The assignment document to each trust provided for $4,085,190 of intended value to go into trust for the taxpayer=s descendants, and for $100,000 in value to be gifted to a foundation. The assignment discussion further required that any value in excess of $4,085,190 would go to the foundation, but that if the value were found to be less than $4,085,190 the foundation would be required to transfer X number of units to the trusts for the descendants until the value in the trust equaled $4,085,190. To simplify, if the units were undervalued, the difference in value would be transferred to the foundation to ensure it received the full $100,000 in value. On the other hand, if the number of units were overvalued, the charity would be required to transfer the excess of $100,000 back to the trusts.

The taxpayer was represented by competent counsel who apparently told them that there needed to be complete independence between the charity that they chose and their personal interests. Who would typically donate $100,000 to a charity that they had not dealt with in the past when the same family had engaged in significant charitable gifting in the past? Would a family foundation that is subject to all of the state law and federal income tax fiduciary and arm=s-length requirements have worked just as well?

Citing Proctor, the IRS argued in the Petter case that the clauses violated public policy. The Tax Court disagreed; "[w]e simply don't share the Commissioner's fear, in gifts structured like this one, that taxpayer is using charities just to avoid tax. We certainly do not find that these kinds of formulas would cause severe and immediate frustration of the public policy in favor of promoting tax audits."[ix] On appeal, the IRS abandoned its public policy argument and therefore the Ninth Circuit Court of Appeals declined to address the issue.

Cutting to the chase for readers with limited time, the decisions in the McCord, Petter, and Hendrix essentially blessed arrangements where the taxpayers makes a Aformula gifts@ whereby the vast majority of a given transfer was to be held for family members with a very small minimum portion that upon revaluation would become a larger portion passing to an independent charitable organization. The basic gist of these transfer arrangements was to give the greater of 1% or any excess amount that would otherwise be a taxable gift to an independent charity with the remaining 99% or less going into trusts for descendants using language that require a Trustee or Trustees for the descendants and the independent charitable organizations to value the assets in question in order to decide actually how much went to the charity and how much went to the descendants. In each of these cases, the charity hired independent professionals and concluded that its 1% share was sufficient. In each of these cases, the IRS challenged the valuation and argued that because of public policy a gift tax should be paid. In each of these situations the Court held that the formula clause was not against public policy and that no gift tax was payable. The authors have been informed that the charities did not make additional plans upon the assets.

It is important to note that under McCord, Petter, and Hendrix, it was completely up to the trustee or trustees of the trusts for descendants and the separate charitable organizations to independently value the interests transferred in order to determine what portion went to the trusts for descendants and what portion went to the charities.

 

In all three situations, the charities had independent counsel and accepted approximately 1% of the interests transferred, notwithstanding that the IRS and Tax Court found (or the parties stipulated) that the interests transferred to the trusts for descendants had significantly higher value than what the charities had originally agreed. Presumably the charities received more as the result of this redetermination.

In all three of these cases, the Tax Court (and the Fifth Circuit Court of Appeal in McCord and the Ninth Circuit Court of Appeal in Petter) found that the valuation adjustment clauses were not void as being against public policy, noting that the result of having the excess value going to charity and the initially intended 1% (approximately) charitable transfer was actually favored by public policy.

In all three cases, the families involved had histories of making significant previous charitable donations, and apparently did not mind having significant portions of the family entities pass to independent charities, or at least were willing to take the risk that this would occur. Many families would have preferred that the extra value resulting from audit would go to descendants as opposed to charity, and doubtlessly many families have used this technique without having been questioned as to value.

These cases are very useful for families who are willing to follow this exact pattern, but we have limited guidance for situations where taxpayers would be inclined to have excess value pass into a family controlled foundations, marital deduction trusts, or other vehicles. The Hendrix case noted that the charitable deductions were consistent with public policy in that Congress explicitly provided a charitable deduction under Internal Revenue Code Section 2055. It would therefore appear that a marital deduction transfer that qualifies for the estate or gift tax marital deduction under Internal Revenue Code Sections 2056 or 2523 not be found to be consistent with public policy in the same manner? Perhaps some spouses will be found to be more eligible as a matter of public policy than others.

The McCord, Petter and Hendrix cases provide no direct guidance on whether a trust agreement can simply provide that any value in excess of amounts that would pass estate tax free would go to charitable or a marital deduction beneficiaries, who would have enforceable legal rights to require trustees serving in a fiduciary capacity to value and equitably apportion ownership of transferred interests in the same manner as would apply under a formula transfer provision.

Such trust clauses can be structured with Apositive public policy@ attributes, such as minimum benefits for separate charitable subtrusts, independent trustees to represent such subtrusts, and legitimate third party charitable beneficiaries with knowledge and independent representation with respect thereto.

 

Taxpayers and their advisors will need to decide how much independence and expenses associated with independence they want to have built into a trust agreement or transfer, taking into consideration that IRS auditors may be less likely to challenge arrangements of this nature. For example, these clauses can be structured so that a specified value of assets would be transferred to a charitable organization or other independent third party regardless of an IRS challenge so that there is a Anon-tax@ reason for assets being transferring to the charitable organization or third party. This helps show that the transferor intended to make a transfer to the charitable organization or third party, without consideration of whether the possibility of an IRS challenge, which can be a key factor in determining whether the clause violates public policy.

In Wandry v. Commissioner, the taxpayers started a family business called Norseman Capital, LLC. The taxpayers wanted to take advantage of the annual gift tax exclusion and their lifetime gifting exemptions by transferring membership units of the LLC to their children and grandchildren.

The gift documents provided that the taxpayers would transfer to each grandchild a "sufficient number of units" in the LLC equaling the annual gift tax exclusion amount. The taxpayers' children would receive a "sufficient number of units" in the LLC equaling a set dollar amount, which would maximize their lifetime gifting exemption.

The gift documents contained the following adjustment clause language:

Although the number of Units gifted is fixed on the date of the gift, that number is based on the fair market value of the gifted Units, which cannot be known on the date of the gift but must be determined after such date based on all relevant information as of that date. Furthermore, the value determined is subject to challenge by the Internal Revenue Service (“IRS”). I intend to have a good-faith determination of such value made by an independent third-party professional experienced in such matters and appropriately qualified to make such a determination. Nevertheless, if, after the number of gifted Units is determined based on such valuation, the IRS challenges such valuation and a final determination of a different value is made by the IRS or a court of law, the number of gifted Units shall be adjusted accordingly so that the value of the number of Units gifted to each person equals the amount set forth above, in the same manner as a federal estate tax formula marital deduction amount would be adjusted for a valuation redetermination by the IRS and/or a court of law.

The taxpayers hired an independent valuation firm to determine the value of Norseman's assets on the date of the transfer. Accordingly, the gifts to the taxpayers' children constituted a 2.39% membership interest in the LLC and the gifts to the grandchildren constituted a .101% membership interest in the LLC.

 

The taxpayers filed a gift tax return reporting the transfers. The IRS audited the return and determined that the values of the membership interests exceeded the taxpayers' gift tax exclusions and issued a notice of deficiency for gift tax due. The taxpayers filed a Tax Court petition and the Court held in favor of the taxpayers.

The government argued that the taxpayers owed gift tax because they transferred completed gifts of fixed percentage interests to the children and grandchildren that exceeded their gift tax exclusion amounts. The taxpayers successfully argued that they did not transfer fixed percentage interests but that they transferred units in the LLC equal to a specific dollar amount. The taxpayers submitted the gift tax return and schedules, which were consistent with the gift documents, demonstrating their intent to gift specific dollar amounts rather than fixed percentage interests in the LLC. The Court contrasted this case with Knight, where the taxpayers' gift tax returns reflected gifts of specified percentage interests in a partnership.

The Court found that the government also failed to prove that the transfer was void as contrary to public policy. The Court distinguished between a "savings clause," which is void because a taxpayer attempts to use the clause to reclaim property and a "formula clause," which is valid because it simply transfers a "fixed set of rights with an uncertain value." A formula clause is valid whereby a taxpayer transfers property equal to a set dollar amount although the value of the property may be unknown at the time of transfer.

The Court cited Estate of Petter for the proposition that taxpayers can transfer a set number of units in an LLC to their descendants based upon a formula provision which basically says that AI give $____ worth of units@ by this transfer or transaction. The gift documentation in Petter provided that if stated that if the value of the units exceeded the dollar amount stated, the excess units would be transferred to charity.

The Court of Appeals in Petter stated:

Under the terms of the transfer documents, the foundations were always entitled to receive a predefined number of units, which the documents essentially expressed as a mathematical formula. This formula had one unknown: the value of a LLC unit at the time the transfer documents were executed. But though unknown, that value was a constant, which means that both before and after the IRS audit, the foundations were entitled to receive the same number of units. Absent the audit, the foundations may never have received all the units they were entitled to, but that does not mean that part of the Taxpayer’s transfer was dependent upon an IRS audit. Rather, the audit merely ensured the foundations would receive those units they were always entitled to receive.

 

Similar to Petter, the children and grandchildren in Wandry were always entitled to predefined units in the LLC equal to a specified dollar amount. The LLC interests were calculated by dividing the set dollar amount of the gift over the fair market value of the LLC assets. At the time of the transfer, the numerator (dollar amount of gift) was known but the denominator (value of the LLC) was unknown. Although unknown, the Court determined the value was constant, meaning that the children and grandchildren would only receive that specified dollar amount irrespective of the value of the LLC assets.

The Court noted that the adjustment clause in Wandry did not transfer excess units to a charity but rather reallocated LLC units among the taxpayers and their children and grandchildren. The Court found that this did not amount to a "savings clause" because the taxpayers were not taking property back, rather the formula clause was utilized to correct the allocation of LLC units among the parties.

Formula valuation and trust marital and charitable deduction clauses are very common in an estate planning setting, and are not newly created devices. Credit shelter trust language that permits the funding of the maximum amount that can pass free of federal estate tax on death has been formula clause driven since the advent of the marital deduction in 1948, with specific periodic guidance having come from the IRS on the various different kinds of formula clauses that are differently used.

Further, the IRS has even enacted valuation adjustment provisions in the Treasury regulations under Code Section 2702 which provide that a Grantor Retained Annuity Trust (GRAT) must repay the Grantor of the trust an amount equal to any undervaluation of the assets that are transferred to the GRAT, if the GRAT annuity is stated in terms of a fraction or percentage. Therefore, it seems illogical to give less credence from a public policy perspective to a formula allocation clause that transfers any excess value to a spouse (or to have such value held in a general power of appointment trust for a spouse) than to a formula allocation clause providing for the transfer of any excess clause to charity. While it remains an open issue whether the courts will approve the use of formula clauses in cases where the donee is a spouse or a marital deduction trust, Wandry provides additional support that this type of transfer may be upheld.[x]

Why would a taxpayer be able to use this type of clause to assure that the maximum amount that can pass estate tax free can be funded without risk of tax induced by a valuation discrepancy, while not having this available in a lifetime gifting context? Taxpayers spend a significant amount of time and effort hiring reputable valuation firms, lawyers, and other professionals in order to make a conscientious effort to use values that are supported under the law by independent third party transaction studies and a number of Tax Court and federal court cases.

It is not the fault of any taxpayer that the valuation discount conclusions in court cases have been extremely erratic, whereby discount percentages determined appropriate by Tax Court and other judges have ranged from 15%[xi] to 64.25%[xii] in situations that would seem to be more similar than different.

 

A conscientious taxpayer who would like to use what remains of his or her $5,120,000 gift tax exemption by transferring interests in a closely held family business is almost always disappointed to learn that it is uncertain whether the valuation of the business or investment entity interest given will equal, be less than, or exceed what remains of his or her allowance.

There are no cases known to the authors that discuss whether a valuation safety clause provided under an irrevocable trust will be considered as ineffective to prevent gift tax from being imposed, but it seems unjust that a responsibly drafted provision would not be given full effect where a taxpayer has conscientiously attempted to provide the appropriate value and has simply determined it best that a specified dollar amount or formula deterrent threshold would be set aside for descendants, with any values and excess thereof to be held as a marital devise or a charitable devise.

Given the possibility that a valuation adjustment clause in a trust document would be respected, why not use them?

HOPE THIS HELPS YOU HELPS OTHERS MAKE A POSITIVE DIFFERENCE!

Alan Gassman

Christopher Denicolo

Kenneth J. Crotty

Erica Pless

CITE AS:

LISI Estate Planning Newsletter #1978, (June 19, 2012) at http://www.leimbergservices.com/ Copyright 2012 Leimberg Information Services, Inc. (LISI). Reproduction in Any Form or Forwarding to Any Person Prohibited – Without Express Permission.

CITES:

Wandry v. Comr., 2012-88;, McCord v. Commissioner, 461 F.3d 614 (5th Cir. 2006); Commissioner v. Procter, 142 F.2d 824 (4th Cir. 1944); Knight v. Commissioner, 115 T.C. 506 (2000); Thomas v. Thomas, 197 P. 243 (Colo. 1921); King v. United States, 545 F.2d 700 (10th Cir. 1976); Estate of Christiansen v. Commissioner, 586 F.3d 1061 (8th Cir. 2009); Estate of Petter v. Commissioner, 653 F.3d 1012 (9th Cir. 2011); Hendrix v. Commissioner, T.C. Memo 2011-133; Price v. Commissioner, T.C. Memo 2010-2; Fisher v. United States, 105 AFTR 2d 2010-1347.

CITATIONS:

[i] 142 F.2d 824 (4th Cir. 1944).

[ii] T.C. Memo 2009-280 (quoting Proctor at 827-828).

[iii] 82 T.C. 239 (1984) Emphasis added in Court's opinion.

[iv] 87 T. C. 78 (1986).

[v] Id.

[vi] 120 T. C. 13 (2203).

[vii] 461 F.3d 614 (5th Cir. 2006).

[viii] 586 F.3d 1061 (8th Cir. 2009).

[ix] T.C. Memo 2009-280 at 42.

[x] See Peter Walsh, AFormula Clause Changes Taxable Gift into Charitable Donation,@ Practical Tax Strategies, April 2010.

[xi] Knight v. Commissioner, 115 T.C. No. 36 (2000)

[xii] Bergquist et al. v. Commissioner, 131 T.C. No. 2 (2008)

All NAEPC-affiliated estate planning councils are eligible to receive a discounted subscription rate to the Leimberg LISI service. Please see more information about the offering. You may also contact your local council office / board member to find out whether they are offering the service as a member benefit.

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