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Significant recent developments in estate planning.

EXECUTIVE SUMMARY

* The current phase-in and indexing of prior EGTRRA provisions will continue to affect estate planning.

* The IRS won significant court victories in the FLP area last year.

* Taxpayers continued to challenge various examples on GRATs in the Sec. 2702 regulations.

This article examines recent developments in estate, trust and gift tax planning. It highlights the current year phase-in and indexing of the Economic Growth and Tax Relief Reconciliation Act of 2001, recent cases and rulings an grantor retained annuity trusts, family limited partnerships and the marital deduction, and other miscellaneous developments.

This article examines recent developments in estate, trust, gift and generation skipping transfer (GST) taxes. It focuses e the current indexing and phase-in prior-year legislative changes, court battles and rulings in significant areas (such as grantor retained annuity trusts (GRATs) self-cancelling installment notes (SCINs) family limited partnerships (FLPs) and the marital deduction) and other miscellaneous IRS guidance.

Legislative Developments

The estate and gift tax remains legislatively unchanged since the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA). All of the EGTRRA tax reduction provisions w expire at the end of 2010, because the Senate was unable get the 60% vote needed to approve a permanent repeal Although the House has raised the issue again, Senate action remains doubtful. Nonetheless, the last 12 months have generated Federal and state legislation that will have a significant effect on income tax and business-succession strategies.

JGTRRA

President Bush was able to get the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA) enacted before Congress adjourned for the summer Although the JGTRRA accelerates real of the EGTRRA income tax provisions and lowers the tax rates on dividends an capital gains, it does not make any changes in the estate and gift tax.

Planning: Planners focusing on business succession will surely find the new 15% tax rates for dividends and long-term capital gains to be useful. (1) These change may affect a taxpayer's choice of entity.

HSA

Clients regularly ask about the deductibility of contributions to memorial or educational funds established at a local bank for the family of a relative or neighbor. Normally, charitable deductions are not available for contributions to individuals or their families to defray medical educational or funeral expenses.

President Bush signed the Homeland Security Act (HSA) on Nov. 25, 2002.The HSA created a new form of charitable trust that may prove useful in estate planning. The Johnny Michael Spann Patriot Trust (Patriot Trust) (named after the CIA agent killed in Afghanistan) allows taxpayers to make charitable contributions to a trust for the benefit of the survivors of (1) members of the U.S. Armed Forces, (2) CIA personnel and (3) employees of the FBI and other Federal agencies charged with the domestic protection of the U.S. it killed in the line of duty as a result of terrorist acts, intelligence operations, military operations, accidents associated with post-Sept. 11,2001 activities and efforts to curb international terrorism.

Planning: Additional guidance from Treasury is needed on Patriot Trusts Funds contributed to a Patriot Trust for a family must be spent within 36 months. Query whether that would allow transferring funds to Sec. 529 accounts.

Gift, Estate and GST Tax Exclusion Indexing

Aside from new legislation, the phase-in provisions of the EGTRRA will continue to affect estate tax planning. In addition, the Taxpayer Relief Act of 1997 required inflation indexing for a number of existing exclusion items, after 1999. The indexing will continue even after the EGTRRA. The EGTRRA phase-in and the indexing changes, which were released earlier this year, (2) are as follows.

Gift and Estate Tax Rates

The top estate tax bracket for 2003 is 49%. In 2004, it will be reduced to 48%.

Credit Equivalent Amounts

The unified credit for both gift and estate tax is currently $1 million. In 2004, the estate and gift tax credits be decoupled and no longer be "unified." The estate tax credit equivalent will increase to $1.5 million effective Jan. 1, 2004; the gift tax credit equivalent will remain at $1 million.

State Death Tax Credit

This credit continues its phaseout, reduced from 50% to 25%, effective Jan. 1,2004. Beginning in 2005, the credit is scheduled to change into a Federal deduction.

Planning: As of May 9, 2003, 17 jurisdictions had decoupled their "pickup" tax from the Federal state death tax credit. (3) The proliferation of separate state taxes will complicate planning for multijurisdictional taxpayers. Today's wealthy individuals have numerous multistate real estate holding: homes, vacation properties, residential and commercial rental properties, etc. The proliferation of the number of state estate and inheritance tax statutes that divorce from the Federal credit will add complexity to the estate planning process.

Gift Tax Annual Exclusion

The Sec. 2503(b) gift tax annual exclusion remains at $11,000 per person per year for 2003. The adjustment is in $1,000 increments as needed to reflect inflation.

Noncitizen spouses are not eligible to receive unlimited property transfers under either Sec. 2523 or 2056, the gift and estate tax marital deduction provisions. Noncitizen spouses are eligible for an annual gift exclusion historically limited to $100,000, under Sec. 2523(i). Effective Jan. 1, 2003, the Sec. 2523 exclusion for noncitizen spouses increased to $112,000.

GST Exemption

This exemption increased to $1.12 million for calendar-year 2003. Indexing continues under the EGTRRA; however, in 2004, the phased-in increase of the GST exemption to $1.5 million will likely surpass and replace the indexed amount.

Special-Use Valuation

Under Sec. 2032A, an executor may elect to value real property used in a farm or business on the basis of actual, rather than highest and best, use. The maximum allowable deduction was set at $750,000; indexing for 2003 increases it to $840,000.

Tax Deferral for Closely Held Business

The Sec. 6166 2% interest rate for the applicable portion of the estate tax payable in installments increased to $1.12 million.

QFOBIs

The deduction for qualified flintily owned business interests (QFOBIs) under Sec. 2057 will be repealed effective Jan. l, 2004.

Receipt of Large Foreign Gifts

For tax years beginning in 2003, recipients of gifts from certain foreign persons may have to report them under Sec. 6039F if the aggregate value of the gifts received in a tax year exceeds $11,827.

Regulatory Developments and Guidance

Split-Dollar Life Insurance Arrangements

Planning: Effective Jan. 1, 2004, tax payers may need to convert to a "loan regime" in tracking and taxing cumulative advances from their employer they want to preserve the ability to "rollout" the excess cash surrender value existing policies tax free. Before the end of 2003, practitioners should identify clients participating in split-dollar insurance arrangements. (4)

Miscellaneous IRS Guidance

* Sec. 645 final regulations (5) on an election by certain revocable trusts to treated as part of an associated estate were published on Dec. 24, 2002 However, under Notice 2003-33, (6) Regs. Sec. 1.645-1(f)(2)(ii) can applied for decedents dying before that date to determine the applicable date that ends the election period (i.e., six months after the dosing letter issue date or other final determination of estate tax liability).

* Secs. 2033 and 2039 guidance New York City and State accidental death benefits was published in Rev. Rul. 2002-39. (7)

* Sample computations of estate under Sec. 2201 were published Rev. Rul. 2002-86. (8)

* Guidance on terminating private foundations was published in R Rul. 2003-13. (9) This may be relevant for terminating charitable remainder trusts.

* Guidance on the taxation of insurance of Louisiana decedents published in Rev. Rul. 2003-40. (10)

* Rev. Proc 2003-42 (11) contains a sample form for a qualified personal residence trust. The form follows regulation, but is incomplete. It fails to contain a reversionary clause a does not state to whom the trust would pass at the end of the tern

* New filing addresses for estate a gift tax documents were published in Notice 2003-19. (12)

* A clarification of the proper method for computing the estate tax under the Victims of Terrorism Tax Relief Act of 2001 was published in Rev. Rul. 2002-86. (13)

Cases and Rulings

GRATs

GRATs continued to receive favorable treatment from the courts; taxpayers challenged various examples contained in the Sec. 2702 regulations. Walton, (14) all 13 members of the U.S. Tax Court unanimously agreed that Example (5) of Regs. Sec. 25.2702-3(e) was invalid. As a result of the Walton decision, tax advisers ca, now construct GRATs that have a zero value for gift tax purposes (i.e., a "zero out" GRAT).

In Schott, (15) is the Ninth Circ reversed the Tax Court (and distinguished the Seventh Circuit's decision in Cook (16)) in holding that a two-life annuity retained by a married couple their GRAT was a "qualified interest under Sec. 2702 and, thus, could subtracted from the value of the property gifted to the trust. It held that IRS's interpretation of Regs. Sec. 25.2702-2(d), Example (7), that the spouse needed to be alive at the time the annuity began, was unreasonable and invalid. In Cook, the trust language had required the spouse to be married and survive the grantor to receive the annuity.

The IRS may not be giving up on the issue of two-life GRATs too soon. Just a few weeks before the Schott decision, it ruled (17) on a two-life GRAT with a power to revoke the annuity payable for the second life, concluding that the grantor could not claim the benefit of the second life in converting to a Walton-type zeroed-out GRAT.

SCINs

The Sixth Circuit upheld (18) a transaction dealing with a SCIN, even though the taxpayer was sloppy in handling the actual payments. On December 15, the taxpayer sold real estate to his son for SCIN in the amount of the property's value appraised 12 months earlier. The SCIN was secured by a mortgage on the properties. Although the note called for monthly payments, the taxpayer orally agreed to a quarterly payment on March 8, with backdated monthly checks. The taxpayer died unexpectedly after surgery on March 12. Medical experts testified that his life expectancy had been 5-13.9 years. Despite the taxpayer's sloppiness the court held the SCIN to be a bona fide transaction. However, the case was remanded to the Tax Court for an analysis of the IRS's claim that a bargain salt had taken place for gift tax purposes From the record, it appears that the taxpayer may have failed to assign a premium to either the interest rate or the principal amount sufficient to cover the cancellation feature.

FLPs

The last 12 months have yielded significant victories for the IRS in the FLP area. In Strangi, (19) Harper (20) and Thompson, (21) the Tax Court relied on Sec. 2036 to strike a potentially mortal blow to the use of FLPs. The IRS argued that the facts in each of the cases showed an implied retained life estate leading to the inclusion of the FLP assets in the decedent's estate.

Over the last three years, the IRS has been attacking FLPs with every conceivable argument. It repeatedly lost its attempts to challenge FLPs as valid business entities or under various sections of Code Chapter 14. For example, in Ken, (22) the taxpayers created a FLP that restricted withdrawal prior to liquidation of the partnership 50 years hence; the parents contributed some of the limited partner (LP) interests to a university. The IRS argued that the family could remove the restrictions after the transfer and, thus, the FLP agreement restriction should be ignored for valuation purposes under Sec. 2704(b). However, the Fifth Circuit affirmed the Tax Court, holding that Sec. 2704(b) did not apply, because of the presence of a nonfamily partner.

In early 2000, the IRS began to abandon its Chapter-14-based arguments, and added a claim under Sec. 2036 to the FLP cases already docketed and moving toward trial. The Service won its first FLP case involving Sec. 2036(a) in Reichardt, (23) in which the decedent's established a FLR but neglected the partnership formalities. The decedent's relationship "to the assets at issue, remain the same after he transferred them."

Strangi: Fresh on the heels of its victory in Reichardt, the Service attempted to add Sec. 2036 to its pleadings, in Strangi I. (24) The Tax Court denied the IRS's motion to add a Sec. 2036 argument just 52 days before the case went to trial. In court, the IRS unsuccessfully challenged the transaction's business purpose and the validity of the entity discounts under Chapter 14. The Fifth Circuit affirmed (25) the Tax Court's reasoning on both the Sec. 2703(a)(2) and business-purpose arguments in the taxpayer's favor; however, it overturned the Tax Court's denial of the IRS's motion to add the Sec. 2036 claim and remanded the case for consideration of that claim.

On remand, the Tax Court addressed the Sec. 2036 issue, in Strangi II. (26) It noted that the burden of proof under Sec. 2036 typically rests on the estate. However, because the IRS raised that issue only after it issued a deficiency notice, the court required the IRS to meet the burden. Despite the additional burden of proof, the Tax Court still held in the Service's favor.

Unlike Reichardt and Harper, the Tax Court found that efforts had been made to document the partnership's actions. However, the decedent died before the first partnership year closed. As a result, the family and their advisers were on notice that the IRS would likely review the partnership's financial affair's in short order.

Despite the FLP's administrative bookkeeping, the Tax Court concluded that the decedent had continued to retain possession and enjoyment of the personal residence he had transferred to the FLP; further, he had derived all his support and liquidity from the entity. While the FLP made pro-rata distributions to partners, only the decedent had held more than a de minimis partnership interest. The court ultimately concluded that the FLP lacked business purpose.

While Strangi II only a Tax Court memorandum decision, it allowed the IRS to make a backdoor argument as to the business purpose behind a FLP's creation. Has the IRS advanced its use of the Sec. 2036 argument? Clearly, last-minute administrative measures will not save a poorly conceived and/or operated FLR But, are FLPs dead or mortally wounded? Probably not.

Planning: The FLP cases selected by the IRS for litigation have contained notoriously bad facts. Nonetheless, they should serve as a stark testimonial on the importance of CPAs in the record-keeping process. As noted in Strangi II, it is not enough to book correcting entries and reclassify transactions after the fact; tax advisers need to be actively involved in the FLP's administration. In the same way that it is important for corporations to respect their formalities to provide shareholders with a shield against liability, it is incumbent on CPAs to make clients realize that FLPs will lose their effectiveness if they are neglected.

Harper (27) and Thompson (28): The Service has continued to add the Sec. 2036 argument to its arsenal. Harper and Thompson both involved facts in which a FLP failed to follow the formalities of the partnership document, and the IRS prevailed on a Sec. 2036(a)(1) argument that the decedent personally retained enjoyment of the partnership assets.

The fact that both cases are Tax Court memoranda, rather than regular decisions, signals that, in the court's view, the Sec. 2036 issue does not involve a new or unusual point of law, but is merely the application of existing law or an interpretation of facts.

Kirnbell (29): Tiffs case revolved an expansion of the IRS strategy on two fronts. First, it advanced the Sec. 2036(a)(1) argument into the district court; second, the Service added an additional challenge under Sec. 2036(a)(2). Harper and Thompson both focused merely on the partnership's operational aspects, and demonstrated an implied understanding to retain enjoyment based on the manner in which the partnership was physically operated; this "implied" retention is at the core of Sec. 2036(a)(1). Kimbell shifts the focus to the legal aspects of the documents under Sec. 2036(a)(2), by claiming that the decedent retained a "legal right" in the documents to control the assets. The documents, not the operational aspects, were the undoing in Kimbell.

Under the partnership agreement terms, Mrs. Kimbell retained the right to remove the general partner (GP) and name herself as the GP. Also, the partnership agreement waived any fiduciary duty of the GP towards the other partners; this "waiver" language is not characteristically found in LP agreements. The district court accepted the IRS's argument to apply Sec. 2036(a) (2) and concluded that the partnership agreement's unique features amounted to a retained right to control the beneficial enjoyment of the partnership assets. As a result, the district court joined the Tax Court and held that the assets should be included in the decedent's estate.

McCord (30): The opinion in McCord was highly anticipated, but proved to be a big disappointment. The taxpayers created a FLP and transferred a specified amount (approximately 82%) of the LP interests to their children (individually and in trusts). The transfers were made subject to restrictions that would have adjusted the gifts if the fair market value (FMV) of the partnership interests were changed (i.e., if" the FMV increased, the increase would be contributed to a specified charity).

Three issues were presented. First, the court reviewed the character of the interests assigned. It acknowledged that the interests were "assignee" interests, not partnership interests; thus, it allowed greater valuation discounts. Second, the assignment language made the children responsible for any girl: tax due on a revaluation of the partnership interests. The court refused to allow the children to use a net-gift approach to the revalued interests, as the additional tax was merely a contingent liability. Third, the language providing that a charity would receive the amount of any transfer valued in excess of the specified value of the intended gift to the children appears to create a disincentive for the IRS to audit the girl tax return mad subsequently adjust the value. An increase in value would not give the I1KS additional revenue, but would give the taxpayer an income tax charitable deduction that it had not otherwise claimed. The IRS generally regards such a price adjustment provision as invalid (i.e., as against public policy). (31)

The Tax Court refused to allow the greater charitable contribution and limited it to the amount that the charity actually received. In a major disappointment to practitioners, the court's opinion focused on the valuation issues, rather than on the price-adjustment issue. Footnote 47 of the opinion seems to indicate that a formula might have been acceptable had it been based on Federal gift tax value. However, as it was based on FMV (which, in the court's opinion, lacked finality), it was a nonissue.

Estate Tax Charitable Deduction

The importance of record-keeping carries over into charitable deductions. In Est. of Atkinson, (32) the Eleventh Circuit upheld the denial of an estate tax charitable deduction when a donor failed to receive an annuity during life from a charitable remainder annuity trust (CRAT) that he had created.

Estate Tax Marital Deduction

Several recent events addressed the availability of the estate tax marital deduction. The first two focused on whether property and/or its earnings were capable of passing to the surviving spouse, a prerequisite for a deduction. Certainly, an estate could not claim a marital deduction for property passing to a trust, when the surviving spouse was not entitled to the entire income for life. (33) In a similar vein, the Ninth Circuit ruled (34) that the marital deduction had to be reduced when funds, earmarked for the marital deduction, were in fact spent on administration expenses and deducted tinder Sec. 2053(a)(2).

In a recent trend brought on by wild gyrations in the equity markets, tax practitioners are attempting to be more creative in drafting distribution formulas for the benefit of spouses and other income beneficiaries, using total-return trusts and formulas that adjust based on market performance. While this might be acceptable for the typical family or residuary trust, caution is needed when dealing with split-interest trusts that may be eligible for the marital or charitable deduction.

The Ninth Circuit addressed one such situation in Est. of Sansone, (35) in which the decedent transferred assets to the surviving spouse for life, with the remainder to charity. Under the trust provisions, the surviving spouse was to receive $100,000 per year for life, plus a possible cost-of-living adjustment. However, the court limited the surviving spouse's marital deduction to the stated annuity payment; in accordance with Regs. Sec. 20.2056(b)-7(e)(2), the references to a cost-of-living adjustment were disregarded. Further, the presence of such language disqualified the remainder from receiving an estate tax charitable deduction. (36)

QFOBIs

QFOBIs were eligible for a maximum estate tax deduction of as much as $675,000 in calendar-year 2000, on schedule T of Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return. The QFOBI deduction is limited to $300,000 ha calendar 2003 and will be repealed in calendar 2004. Sec. 303 generally allows closely held businesses to redeem stock held by an estate to allow it to pay estate taxes and administration expenses without the payment being deemed a dividend. The Service ruled (37) on the interaction of the two tax provisions, noting that estates will not forfeit their eligibility for a QFOBI deduction as a result of" a Sec. 303 redemption, as long as before the redemption, the corporation met Sec. 2057 requirements.

Estate Tax Administrative Expenses

The Second Circuit ruled (38) that to be deductible, executor fees and administrative expenses must satisfy both state and Federal law. The court held that state law merely establishes a threshold requirement; Sec. 2053 ultimately controls deductibility. Only $6,732 of $16,875 of personal representative fees were allowed when the bulk of the assets were transferred pursuant to the trust, rather than the estate.

Similarly, the Court of Federal Claims held (39) that it had the right to review a Louisiana probate court's determination of reasonableness of deductions claimed for executor's and attorney's fees and overhead expenses. The state court's approval of the fees created a presumption of reasonableness; the burden then shifted to the IRS to refute the charges.

IRS Administrative Matters

EINs

The IRS announced (40) that businesses may obtain new employer identification numbers (EINs) directly from the IRS website, at www.irs.gov. Practitioners may request numbers for clients, but they need to keep a signed SS-4, Application for Employer Identification Number, on the authorizing the web request.

Relief from Estate Tax Return Errors

The IRS allowed an estate Sec. 2056 relief for an erroneous marital deduction on Form 71716, Schedule m.41 The estate made two errors. First, it listed both the marital trust and the credit shelter trust property on Schedule M. Second, it miscalculated the amounts that should have passed into the marital trust. In citing Rev. Proc. 2001-38, (42) which applies to erroneous elections not necessary to reduce the estate tax to zero, the Service allowed the estate to the a supplemental Form 706 within the filing period for a refund claim to correct the schedule. The Service instructed the taxpayer to claim the correct amounts for the actual marital trust and to attach a copy of the ruling to the supplemental return. (43)

Tenancy by the Entirety

Property held by a husband and a wife as tenants by the entirety is, generally protected from the claims of a spouse's creditors. Last year, however, the Supreme Court held (44) that IRS tax liens against a husband attach to real estate held by a husband and wife as tenants by the entirety. his year, the Sixth Circuit applied (45) the Supreme Court's ruling against a prominent Detroit attorney who was convicted of willful failure to pay Federal income taxes and ordered to pay taxes and penalties totaling more than $8.6 million. The court allowed the IRS to enforce a levy against real estate owned by the attorney as a tenant by the entirety at the time flint the lien for the taxes arose.

Conclusion

Estate planning for the balance of 2003 and all of 2004 promises more of the same. Few legislative changes should be expected in the Federal arena, while more and more states will surely decouple the pick-up tax. Housekeeping should be the major focus of estate planners' practice over the coming months. Clients with split-dollar life insurance arrangements in place should be identified and contacted.

FLP damage control will become imperative. Practitioners should insert themselves into the FLP recordkeeping process. Clients should he encouraged to consult with tax advisers before making partnership distributions and before paying extraordinary or personal expenses out of the partnership, if unmarried elderly clients own or control the GP interest, consideration should be given to selling or redeeming that interest before death. Holding the controlling interest at death could lead to a successful IRS challenge under Sec. 2036 and cause the inclusion of all of the partnership's assets without valuation discounts. Now is not the time to allow clients to be sloppy.

Editor's note: Mr. Whitlock is a member of the AICPA Tax Division's Trust, Estate, and Gift Tax Technical Resource Panel (TRP).

(1) For a discussion of the JGTRRA tax rote changes Hegt, "JGTRRA Cuts Rates, Increases Some Deductions and Credit," p. 542, this issue.

(2) Rev. Proc. 2002-70, IRB 2002-46, 845.

(3) These jurisdictions are: Kansas, Maine, Maryland, Massachusetts. Minnesota, Nebraska. New Jersey, New York, North Carolina, Oregon, Pennsylvania, Rhode island, Vermont, Virginia, Washington, Wisconsin and the District of Columbia. The Illinois legislature voted to decouple on June 2, 2003; the bill awaits the governor's signature at press time.

(4) For further discussion, see Whiflock and Vogel. "Split-Dollar Life Insurance Alert!," 34 The Tax Adviser 479 (August 2003).

(5) TD 9032.

(6) Notice 2003-33, IRB 2003-23, 990; see Scarpa, Tax Clinic, "Electing to Treat a Revocable Trust as Part of an Estate," 34 The Tax Adviser 455 (August 2003).

(7) Rev. Rul. 2003-39, IRB 2002-27, 33.

(8) Rev. Rul. 2003-86, IRB 2002-52, 993.

(9) Rev. Rul. 2003-13, IRB 2003-4, 305.

(10) Rev. Rul 2003-40, IRB 2003-17, 813.

(11) Rev. Rul. 2003-42, IRB 2003-23, 993.

(12) Notice 2003-19, IRB 2003-14,703.

(13) See Note 8, supra.

(14) Audrey J. Walton, 115 TC 589 (2000); see Whitlock and McNamara. "Significant Recent Developments in Estate Planning (Part II)," 32 The Tax Adviser 618 (September 2001).

(15) Patricia A. Schott, 319 F3d 1203 (9th Cir. 2003); see Tax Trends, "Qualified Annuity Can be Based on Two Lives." 34 "The Tax Adviser 297 (May 2003).

(16) William A. Cook, 269 F3d 854 (7th Cir. 2001).

(17) IRS Letter Ruling (TAM) 200319001 (12/17/02).

(18) Est. of Duilio Costanza, 320 F3d 595 (6th Cir. 2003).

(19) Est. of Albert Strangi, TC Memo 2003-145.

(20) Est. of Morton B. Harper TC Memo 2002-121.

(21) Est. of Theodore Thompson, TC Memo 2002-246.

(22) Blaine P. Kerr, 113 TC 449 (1999), aff'd, 292 F3d 490 (5th Cir. 2002).

(23) Est. of Charles Reichardt, 114 TC 144 (2000).

(24) Est. of Albert Strangi, 115 TC 478 (2000).

(25) Rosalie Gulig, on Behalf of Est. of Albert Strangi, 293 F3d 279 (5th Cir. 2002).

(26) See note 19, supra.

(27) For more details, see Pannese. Tax Clinic, "Tax Court Upholds FLP Disallowance," 33 The Tax Adviser 628 (October 2002).

(28) For a discussion, see Olshin, Fax Clinic, "See. 2036 and FLPs," 34 The Tax Adviser 191 (April 2003).

(29) David A. Kimbell, Sr., 244 FSupp2d 700 (ND TX 2003).

(30) Charles T. McCord. Jr., 120 TC No. 13 (2003).

(31) See Frederic W. Proctor, 142 F2d 824 (4th Cir. 1944).

(32) Est. of Melvin Atkinson, 309 F3d 1290 (11th Cir. 2002).

(33) Est. of Ralph Davis, TC Memo 2003-55.

(34) Betty R. Brown, 329 F3d 664 (9th Cir. 2003).

(35) Est. of Robert Sansone, 36 Fed. Appx. 603 (9th Cir. 2002).

(36) Generally, to qualify the remainder interest for a charitable deduction, it must rake the form of either a CRAT or a charitable remainder unitrust. Sec. 664, which defies such tram, does not permit the noncharitable payment to fluctuate. Thus, the inclusion of the cost-of-living language tainted the charitable deduction.

(37) Rev. Rul. 20003-61, IRB 2003-24, 1015.

(38) Est. of Constance Grant, 291 F3d 352 (2d Cir. 2002).

(39) Succession of Betty, Hells, 52 Fed. C1. 745 (2002), rem'd, 7/12/02.

(40) IRS. 2003-77 (6/13/03).

(41) IRS Letter Ruling 200323010 (2/19/03).

(42) Rev. Proc. 2001-38, 2001-1 CB 1335.

(43) Similarly, the IRS National Office continues to be very understanding in granting Regs. Sec. 301.9100 relief to practitioners who failed to timely allocate GST exclusions on gift tax returns. The AICPA Trust, Estate and Gift Tax TRP will be encouraging the IRS to issue guidance in the form of a revenue procedure or revenue ruling to further streamline or simplify the process of correcting GST errors.

(44) Sandra L. Craft, 122 SCt 1414 (2002).

(45) Elbert L. Hatchett, 6th Cir., 6/4/03.

Brian T. Whitlock, J.D., LL.M., CPA Partner-in-Charge, Wealth Transfer Services Group Blackman Kallick Bartelstein, LLP Chicago, IL
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Author:Whitlock, Brian T.
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Date:Sep 1, 2003
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