A close shave with the IRS.In a recent Tax Court decision, Est. of D'Ambrosio, 105 TC No. 18 (1995), the court ruled that transfers that depend on the "bona fide [Latin, In good faith.] Honest; genuine; actual; authentic; acting without the intention of defrauding. A bona fide purchaser is one who purchases property for a valuable consideration that is inducement for entering into a contract and without suspicion of being sale exception" of Sec. 2036(a) must be adequately valued. This was defined as consideration sufficient so that the transferor's gross estate will not be depleted by the transaction. Vaparo, Inc., a closely held corporation Noun 1. closely held corporation - stock is publicly traded but most is held by a few shareholders who have no plans to sell corp, corporation - a business firm whose articles of incorporation have been approved in some state , was successfully recapitalized in 1983. As a result of the recapitalization and subsequent gift, the decedent An individual who has died. The term literally means "one who is dying," but it is commonly used in the law to denote one who has died, particularly someone who has recently passed away. ended up owning 470 shares of the company's preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. . In September 1987, when she was 80 years old, she sold the remainder interest in the shares to Vaparo for a private annuity valued at $1.32 million. The total value of the shares at this time was $2.35 million. The decedent died in May 1990, after receiving total payments of $592,078. During this time, the decedent neither sold, relinquished nor otherwise disposed of her income interest. The executrix executrix (pl. executrices) n. Latin for female executor. However, the term executor is now unisex. EXECUTRIX, A woman who has been appointed by. will to execute such will or testament. See Executor. of the estate did not include any value of the stock or remainder interest in the gross estate. The executrix interpreted Sec. 2036(a) to allow for the removal of the entire value of property from an estate due to the sale of the property's remainder interest for a value equal to the remainder interest. The court concluded that the decedent's transfer of the remainder interest, by an 80-year-old to a family-owned business in return for an annuity whose value was more than $1 million less than the value of the stock, constituted a testamentary transfer rather than a bona fide sale. The decedent did not receive full and adequate consideration for her stock, and the full value of the stock, less the value of the annuity, was includible in her taxable estate Taxable Estate The total value of a deceased person's assets that are subject to taxation - minus liabilities and minus the prescribed tax-deductible portion of assets left behind by the deceased. . |
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