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Significant recent developments in estate planning.

Part I of this article, in the August issue, analyzed current developments in family limited partnerships, qualified personal residence trusts and gift taxes. Part II examines cases, regulations and rulings on the following: gifts, disclaimers, valuation, the marital deduction, charitable planning, the generation-skipping transfer tax and Chapter 14.

Part II of this two-part article examines a number of judicial decisions and administrative pronouncements concerning gifts, disclaimers, valuation, the marital deduction, charitable planning, the generation-skipping transfer (GST) tax and Chapter 14 that have occurred between May 1997 and April 1998.

Gift Taxes

The following significant developments occurred during the period:

* A trustee with no beneficial interest in corpus did not make a gift to a trust beneficiary.

* The Service sanctioned a private split-dollar insurance arrangement.

* Final disclaimer regulations were issued.

No Gift By Trustee

In Saltzman,(35) the Second Circuit held that the Tax Court erred in concluding that an exchange of common stock held by a trust in a recapitalization for preferred stock of lesser value constituted a gift by the trustee. Saltzman revisits a basic requirement for imposition of the gift tax--the existence of a "transfer" for Federal gift tax purposes.

In Saltzman, a majority shareholder (S) transferred his shares proportionally to two irrevocable trusts and outright to his child. S was the co-trustee of both trusts. Acting in their capacity as corporate directors, the co-trustees recapitalized the corporation, exchanging the trust common stock for preferred. The recapitalization resulted in an increase in the value of the stock held outright by the child and a decrease in the value of the stock held by the trusts. The Service assessed additional gift tax, contending that the shift in value accompanying the recapitalization was, in effect, a gift from S to his child. The Tax Court sustained the Service's determination, concluding that S did not make the transfer in his capacity as co-trustee. The Second Circuit disagreed, holding that the Tax Court had erred as a matter of law.

The Second Circuit first restated the axiom that Federal revenue law creates no property rights, but merely attaches federally defined consequences to rights created under state law. After recognizing that the recapitalization was performed by S and others in their capacity as corporate directors and reviewing New York State trust law, the court found that S was, by necessity, also acting in his capacity as a trustee. As such, S owed the trust beneficiaries the absolute duty of undiluted loyalty. Because S was acting within his fiduciary power, the court concluded that, as a matter of law, S could not have made a gift to his child as a result of the recapitalization. If S had made a gift, it was in violation of his fiduciary duties and voidable by the trust beneficiaries. Because the gift was voidable, it was not a completed gift. The Second Circuit also cited Regs. Sec. 25.2511-(g)(1) as grounds for its decision, which states in part that "a transfer by a trustee of trust property in which he has no beneficial interest does not constitute a gift by trustee...."

Saltzman highlights the courts' continuing reluctance to assume that a fiduciary is violating fiduciary duties or acting in a capacity other than as a fiduciary absent substantial proof to the contrary.

Split-Dollar Life Insurance

In Letter Ruling 9745019,(36) the Service ruled that a private split-dollar life insurance arrangement involving a husband and wife and an irrevocable trust did not trigger inclusion of the policy proceeds in the insureds' estates.

A trust acquired and owned a second-to-die life insurance policy on the lives of a husband and wife and was the named policy beneficiary. The taxpayers and the trustee entered into a collateral assignment split-dollar agreement for the policies held by the trust. Under the arrangement, the trustee paid the portion of the annual insurance premiums that equaled the insurer's current published premium rate for annually renewable term insurance. After the first death, the trustee was required to pay the portion of the annual premium equal to the lesser of (1) the applicable amount provided in the P.S. 58 tables or (2) the insurer's current premium rate for annually renewable term insurance. The taxpayers would pay the remaining portion of the annual premium.

The Service held that the taxpayers' annual premium payment under the split-dollar agreement would not be a gift to the trust, because the survivor's estate would be reimbursed for the portion of the premiums paid. This aspect of the ruling is consistent with the Service's earlier rulings on split-dollar arrangements in the employer-employee context. More interesting is the Service's conclusion that the taxpayers did not retain any incidents of ownership in the policy to force estate inclusion.(37) The Service focused on the part of the split-dollar agreement that entitled the trustee to reimburse the taxpayers the cash surrender value of the policy and to continue to maintain the policy in the trust for the beneficiaries' benefit. The Service viewed the right of the trustee to continue the policy as preventing the taxpayers from forcing a policy cancellation.

This taxpayer-favorable ruling presents planning opportunities. It provides a means of structuring a life insurance arrangement that may help minimize the value of the gifts associated with premium payments. By structuring a life insurance arrangement similar to that found in Letter Ruling 9745019, a taxpayer can reduce gift tax exposure, because the annual gift necessary to pay premiums should be limited to the lesser of the excess of the amount transferred to the trust in any year over (1) the applicable amount provided in the P.S. 58 tables or (2) the insurer's current premium rate for annually renewable term insurance.

Final Disclaimer Regs.

The Service issued final regulations under Sec. 2518 on the treatment of disclaimers for estate and gift tax purposes.(38) Regs. Sec. 25.2518-2(c) (4)(i) now permits a joint tenant to disclaim jointly held property not unilaterally severable on the same basis as joint property unilaterally severable. Previously, a surviving joint tenant could disclaim an interest in a joint tenancy with right of survivorship or a tenancy by the entirety only if the tenancy was severable under local law. This created problems, especially if a purchaser of a residence was not aware that the decision to take title to the property as either joint tenants with right of survivorship or tenants by the entirety affected the ability to disclaim the property after the first joint tenant's death.

Retained Interests and Powers of Appointment

Sale of Remainder Interest

In Wheeler,(39) the Fifth Circuit held that the sale of a remainder interest at actuarial value was for full and adequate consideration and did not result in a taxable retained interest under Sec. 2036(a).The Fifth Circuit's decision, which followed the Third Circuit's logic in Est. of D'Ambrosio,(40) may have helped revitalize a sophisticated planning technique involving the sale of a remainder interest.

At age 60, the decedent had conveyed a ranch to his sons, reserving a life estate. His sons paid for the ranch with a secured promissory note equal to the actuarial value of the remainder interest.(41) Over the years, the decedent forgave some of the debt and the balance was satisfied in full prior to his death. However, the IRS claimed that an additional $700,000 of value should have been included on the decedent's estate tax return, representing the difference between the ranch's value at the date of death and the consideration paid for the remainder interest.

The district court upheld the Service's assessment, relying on factually similar cases that had considered the application of Sec. 2036 to a sale of a remainder interest in property; it concluded that "full and adequate consideration must equal the full value of the property in which the remainder interest is purchased, not the value of the remainder interest determined under the Service tables." The Fifth Circuit reversed the district court's decision, in effect adopting and reinforcing the Third Circuit's reasoning in D'Ambrosio.

The Fifth Circuit examined Gradow(42) and other cases cited by the Service and relied on by the district court, noting that they involved a transfer of a remainder interest in the surviving spouse's/transferor's share of community property in exchange for a life interest in the deceased spouse's/ transferee's share. The court distinguished those cases on the grounds that, in those situations, the transferor's estate was depleted, because the life estate did not restore the full value of the transferred property. The Fifth Circuit concluded that because the Gradow facts were distinguishable, that rationale did not apply.

It remains unclear whether the Service will give up on this issue, although it is unlikely given the stakes involved. Although the Third and Fifth Circuit opinions represent victories for taxpayers who have entered into these transactions, the Supreme Court has refused to review the Third Circuit's decision in D'Ambrosio, leaving the issue ripe for further development in the circuits that have not yet decided it.

Debts, Claims and Administrative Expenses

City Inheritance Taxes Not Deductible

In McFarland,(43) a district court granted summary judgment against executors of a Louisiana resident's estate who sought an administrative expense deduction for city inheritance taxes paid to New Orleans. The executors unsuccessfully argued that Congress's intent was to disallow a deduction only when a corresponding credit had been granted elsewhere (i.e., state death and inheritance tax credit); because the Code provided no credit for municipal inheritance taxes paid, the deduction should be allowed.


Current decisions and rulings included the following:

* The Tax Court rejected a claimed valuation discount for potential capital gains taxes.

* The Tax Court addressed the proper use of the actuarial tables.

No Discount for Potential Capital Gains Tax

The Tax Court held that a donor could not reduce the value of gifted stock to reflect the built-in capital gains taxes that would be incurred if the corporation liquidated and sold its assets, in Eisenberg.(44) A taxpayer gifted stock in a closely held corporation with commercial rental property as its sole asset. For gift tax purposes, the taxpayer reduced the stock's value by 25% for a minority discount and by the full amount of capital gains taxes attributable to the built-in gain on the building. The Tax Court held that no reduction in the value of the closely held stock to reflect built-in-gains is allowed unless the taxpayer can demonstrate that the liquidation of the corporation or the sale of its assets is likely to occur. The court analogized the capital gains taxes to brokerage commissions and other disposal costs, none of which are deductible from fair market value (FMV). The taxpayer contended that the built-in capital gains would be considered by a hypothetical buyer of the stock.

The court rejected this view and adopted the Service's position that a buyer could still continue leasing the building without incurring any tax cost. Further, the taxpayer presented no evidence of a liquidation plan. Although the decision in this case is no surprise, it does represent the first time the Tax Court granted summary judgment on this issue.

Use of Actuarial Tables by Sick Donor

In Est. of McLendon,(45) the decedent had entered into a private annuity agreement six months before his death. In structuring the transaction, he had complied with Rev. Rul. 80-80,(46) which provides that the actuarial tables in the regulations can be used unless "death is clearly imminent." "Death is not clearly imminent if there is a reasonable possibility of survival for more than a very brief period, death is not clearly imminent if the individual may survive for a year or more and if such possibility is not so remote as to be negligible." However, the ruling does not define "so remote as to be negligible." The Service challenged the estate's position that the standard actuarial tables could be used to value the decedent's annuity contract, arguing that there was no reasonable possibility of the decedent's survival for more than one year at the time of the gift.

The Tax Court upheld the Service's position and assessed additional gift and estate taxes. The Fifth Circuit reversed and remanded to the Tax Court on the issue of the applicability of the actuarial tables. When the Tax Court again upheld the Service's position, the case was again appealed to the Fifth Circuit, which reversed the Tax Court again, holding that the use of the actuarial tables was proper.

The Tax Court had held that the actuarial tables could not be used to compute the value of the remainder interest because death was imminent and predictable on the date of agreement, as implied from a cancer diagnosis. At trial, the Service presented undisputed evidence that the decedent had only a 10% chance of surviving one year. Disagreeing with the Tax Court's interpretation of the term "so remote as to be negligible," the Fifth Circuit reversed and held that because the decedent had at least a 10% chance of surviving for more than one year at the date of agreement, he could use the actuarial tables in valuing the remainder interest and related annuity.

Rev. Rul. 80-80 was superseded by Regs. Sec. 25.7520-3(b)(3), which is effective for gifts made after 1995. Under the regulation, the actuarial tables are inapplicable if an individual is terminally ill. An individual who is known to have an incurable illness or other deteriorating physical condition is terminally ill if there is at least a 50% probability that the individual will die within one year. However, if the individual survives for 18 months or longer after the date the gift is completed, that individual is presumed to have not been terminally ill at the date the gift was completed, unless the contrary is established by clear and convincing evidence. Under today's standards, it is likely that the Fifth Circuit would have reached an opposite result in McLendon.

Charitable Gifts

The following cases and rulings were issued:

* A qualified appraisal was required for a donation of nonpublicly traded stock.

* Gain had to be recognized on charitable stock donated in the midst of a tender offer.

* The Service issued a surprise ruling on net income makeup charitable remainder unitrusts (NIMCRUTs).

Appraisal Required for Nonpublicly Traded Stock

In Hewitt,(47) taxpayers donated stock of a closely held company and asserted that the FMV charitable deduction should be based on the average pershare price of stock traded in bona fide, arm's-length, contemporaneous transactions. No appraisal had been obtained for the stock transferred. While the taxpayers filed a Form 8283, Noncash Contributions, the form reflected only the cost and FMV of the gifted stock; the stock was not identified, nor were the number of gifted shares listed. The Tax Court held that the taxpayers' charitable deduction for the donation of the nonpublicly traded stock was limited to their basis, because of the failure to obtain the qualified appraisal required by Regs. Sec. 1.170A-13.

The Service argued that the charitable deduction should be limited to the stock's basis because there was no qualified appraisal. The court rejected the taxpayer's contrary argument that there was substantial compliance based on Bond.(48) The court in Bond had found that the taxpayer complied with the statutory requirements, even though a separate appraisal had not been obtained and the qualification of the appraisal had been omitted from the appraisal summary attached to the return. In Hewitt, the taxpayer had failed to attach an appraisal report to the return.

The taxpayer also contended that there was a market for the closely held stock; thus, no appraisal was required. However, the appraisal exemption applies only to publicly traded stock. Finally, the court noted that the fact that the stock had an ascertainable FMV was insufficient to constitute substantial compliance with a statutory condition. This case illustrates the importance of obtaining an appraisal when donating closely held stock, even though there may be contemporaneous sales transactions near the time of the gift.

Gift of Tender Offer Stock

In Ferguson,(49) the Tax Court held that taxpayers who donated appreciated stock to a charitable organization immediately before the corporation merged in a tender offer were taxable on the appreciation, under the anticipatory assignment of income doctrine.

The donors gave appreciated Company A stock to several charities. Before the gifts, A and Company B had agreed to merge. B made a cash tender offer for A's shares and sufficient A shares had been tendered before the donation for the merger to be approved. The charities later sold the A shares received from the donors, as required by the tender offer.

Applying the anticipatory assignment of income doctrine, the Service attributed the capital gains from the sale of the stock by the charity to the donors, arguing that the donors had contributed a fixed right to receive cash rather than an interest in A. The donors proffered several refuting arguments, claiming first that the charities were not legally obligated to tender their shares; second, the charitable gifts were made before the adoption of a resolution by B's board stating the merger terms that was equivalent to a shareholder vote.

The Tax Court held that the right to the proceeds matured when more than 50% of the outstanding A shares were tendered; in effect, this was A's shareholder vote approving the merger. Because more than 50% of the outstanding shares had been tendered before the donors made their gifts, the assignment of income doctrine applied and they were taxable on the gain realized by the charity. The court acknowledged that the tender offer was conditioned on B acquiring at least 85% of A's stock, but noted that this condition was not binding and could have been waived.

The court distinguished Palmer(50) on the grounds that the parties at issue had gone further toward consummating the transaction prior to the gifts to charity. The Tax Court found that the critical question was whether the charities were legally bound or could be compelled to complete the sale immediately after the gift.(51) The court found that the charities could be compelled to complete the sale immediately after the gift, because more than 50% of the stock had been tendered before the donation.

Income Deferral NIMCRUT Approved

The Service issued an unpublished Letter Ruling (TAM)(52) involving a NIMCRUT(53) funded with tax-deferred annuities. According to the TAM, an individual transferred closely held stock to a NIMCRUT with an 8% stated unitrust interest. The grantor and his spouse were current recipients of the unitrust amount. The trustees sold the stock and invested in tax-deferred annuity contracts. The trustees intended to defer income distributions from the trust for five years, then later re-evaluate the needs of the unitrust recipients. The trust instrument and state law were both silent as to whether appreciation within the contract was trust accounting income that was required to be distributed in the current year.

There has been concern that the income deferral element of a deferred annuity contract constitutes a use of trust assets for the benefit of a disqualified person that could result in self-dealing penalties. With respect to the facts presented, the Service quieted this concern by holding that the purchase of the deferred annuity contracts did not constitute self-dealing or disqualify the trust as a CRUT. The TAM stated that "since charitable remainder trusts by their intrinsic nature provide for a continuous use by a disqualified person of the entire trust corpus, we conclude that the presence of an unreasonable effect on the charitable remainder interest distinguishes a permissible use of trust assets from an impermissible use."

This ruling has taken the estate planning community somewhat by surprise, because of the Service's recently announced study of the use of investment strategies enabling a NIMCRUT trustee to defer income and control the receipt of distributable income,(54) However, a number of practitioners firmly believe that the legislative history surrounding NIMCRUTs strongly supports (if not mandates) the result reached by the Service in the TAM.

Marital Deduction

The following developments occurred:

* The Service issued a notice in the wake of a Supreme Court decision on administration expenses.

* The duty of consistency required an estate inclusion.

Hubert Regs. Project

The Service issued Notice 97-63(55) in response to the ambiguities left in the wake of the Hubert(56) decision. In Hubert, a muddled (4-3-2) Supreme Court decision, the Court examined whether the payment of administration expenses out of the income of a residuary marital trust reduces the marital deduction. The court concluded that the marital deduction could not be reduced under the facts presented, but stated that if the use of income for the payment of administration expenses was a "material limitation" on the surviving spouse's right to income, the marital deduction could be reduced.

The notice outlined several alternative approaches for testing "materiality" and invited public comment. The first alternative involves distinguishing between administration expenses properly charged to income and those properly charged to principal. These characterizations would not be affected by local law or the terms of the governing instrument.

The second approach provides a de minimis safe harbor that would allow a fixed percentage of the gross income for the estate "or a specified dollar amount, or some combination thereof" to be paid from income without reducing the marital deduction. The third approach simply provides that any use of income for the payment of administration expenses constitutes a material limitation that reduces the marital deduction.

Duty of Consistency Causes Estate Inclusion

The Tax Court, in Letts,(57) broadly applied the duty of consistency doctrine in ruling that a surviving spouse's estate must include the value of a life interest excluded from her spouse's estate. The decedent was a life beneficiary of a testamentary trust created by her deceased husband. The husband's estate had claimed a marital deduction for the value of the trust's assets at the time of his death. The decedent's executors excluded the trust property from her estate on the grounds that the husband's trust failed to meet the qualified terminable interest property requirements of Sec. 2056(b)(7); thus, it was a terminable interest for which the marital deduction should never have been allowed. The executor's position was a classic case of whipsawing the government; the Service would have no recourse if the estate's position was upheld, because the statute of limitations had expired on the husband's estate.

Predictably, the Tax Court rejected the estate's argument, through the application of the duty of consistency. The court described the duty of consistency as preventing a taxpayer from benefiting in a later year from an error or omission in an earlier year that cannot be corrected, because the time to assess tax for the earlier year has expired. Three tests must be met for the doctrine to apply: (1) the taxpayer made a representation of fact or reported an item for tax purposes in one tax year; (2) the INS acquiesced in or relied on that fact for that year; and (3) the taxpayer desires to change the representation previously made in a later tax year after the earlier year has been closed by the statute of limitations.

Before applying the doctrine, the Tax Court needed to find whether the duty applies when two separate taxpayers are involved (i.e., two estates). While it could cite no authority for applying the duty in such a case, it did hold that sufficient "identity of interests" existed, because the decedents had been married to each other and formed a single economic unit, the beneficiaries of both estates were essentially the same, the decedent was an executrix of her husband's estate and their son was an executor of both estates. This case is unique in that it is the first to formally hold that the duty of consistency can apply to bind one taxpayer to a representation made by another when there is sufficient identity of interests between the taxpayers.

Other Developments

A 100% stepped-up basis was permitted for pre-1977 spousal joint property. Under current law, when a taxpayer owns property as a joint tenant with right of survivorship, the estate of the first spouse to die includes only one-half of the property's value. For income tax purposes, the surviving spouse's basis in the property includes a basis step-up for one-half of the property's value, plus the spouse's original basis. However, in Gallenstein,(58) the Sixth Circuit held that in the case of pre-1977 joint tenancy property, the surviving spouse receives a basis step-up to its FMV, as long as he did not contribute consideration for the property. The Fourth Circuit(59) and the Tax Court(60) recently adopted the Gallenstein rule. It remains to be seen whether the Service will continue to challenge this position in light of its defeats.

GST Tax Developments

Trustee Powers Construed

In Letter Ruling 9809030,(61) the trustee applied to a local court to determine whether he could restructure the investments of a trust created prior to the enactment of Chapter 13. The ruling involved a trust with corpus initially consisting of stock in a closely held corporation. The stock was sold and invested in a diversified portfolio of stocks and bonds. The trustee sold the stock in the belief that the trust's existing investment strategy would not allow it to meet its obligations to current income and remainder beneficiaries. The trustee applied to the local court to request that the trust be allowed to pursue an investment strategy that entailed the investment of a greater portion of the trust's principal in stocks and to distribute a portion, of what might otherwise be trust principal to income beneficiaries.

The court refused to rule on the validity of the investment strategy and only addressed whether the trustee could allocate to income some or all of the capital gains realized during the year. The Service ruled favorably that the court merely construed the extent of the powers granted to the trustee, and did not change the quality, value or timing of any beneficiary's interest that would result in the loss of grandfather protection. A number of other letter rulings(62) also illustrate fact patterns in which the Service approved certain administrative changes that did not affect a trust's GST tax grandfathered status.

Allocating the GST Tax Exemption

The Service continued to generously extend relief under Regs. Sec. 301.9100-1 by permitting a retroactive allocation of the GST tax exemption to the date of creation of an inter vivos trust.(63)

Chapter 14 Special Valuation

The Service ruled that a spouse's revocable contingent right to receive annuity payments from a grantor retained annuity trust is not a qualified interest for Sec. 2702(b) purposes.(64) This is the second TAM valuing a spouse's revocable interest at zero in determining the gift to the remainder beneficiaries.(65)

(35) Eric F. Saltzman, 131 F3d 87 (2nd Cir. 1997) (80 AFTR2d 97-5731, 98-1 USTC [paragraph] 50,164), rev'g and rem'g TC Memo 1994-641.

(36) IRS Letter Ruling 9745019 (8/8/97).

(37) See Rev. Ruls. 79-129, 1979-1 CB 306 and 81-164, 1981-1 CB 458, involving private split-dollar arrangements with family trusts that were deemed to be includible in the insured's estate, because the insured held incidents of ownership in the policies.

(38) TD 8744 (12/30/97).

(39) John Michael Wheeler, 116 F3d 749 (5th Cir. 1997)(80 AFTR2d 97-5075, 97-2 USTC [sections] 60,278).

(40) Est. of Rose D'Ambrosio, 101 F3d 309 (3d Cir. 1996)(78 AFTR2d 96-7347, 96-2 USTC [sections] 60,252), cert. denied.

(41) The Service conceded that the remainder interest was correctly valued.

(42) George S. Gradow, 897 F2d 516 (3rd Cir. 1990)(59 AFTR2d 87-1221, 90-1 USTC [sections] 60,010).

(43) Charles E. McFarland, E.D. La., 1997 (80 AFTR2d 97-8348).

(44) Irene Eisenberg, TC Memo 1997-483.

(45) Est. of Gordon B. McLendon, 135 F3d 1017 (5th Cir. 1998)(81 AFTR2d [paragraph] 98-476, 1998-1 USTC [paragraph] 60,303).

(46) Rev. Rul. 80-80, 1980-1 CB 194.

(47) John T. Hewitt, 109 TC No. 12 (1997).

(48) DeWayne Bond, 100 TC 32 (1993).

(49) Michael Ferguson, 108 TC 244 (1997).

(50) Daniel D. Palmer, 62 TC 684 (1974).

(51) Rev. Rul. 78-197, 1978-1 CB 83.

(52) Unpublished IRS Letter Ruling (TAM) (1/9/98), 98 TNT 34-27 (2/20/98).

(53) A NIMCRUT is a CRUT that (1) pays the lesser of trust accounting income or the unitrust percent and (2) provides for a suspense account to track the cumulative amount by which payments from the trust to the income beneficiary are less than the calculated unitrust amount. In a year in which trust income exceeds the unitrust amount, the income earned by the trust is paid to the income beneficiary up to the value of the NIMCRUT's suspense account.

(54) See the preamble to the charitable remainder trust proposed regulations, REG-209823-96 (4/18/97).

(55) Notice 97-63, IRB 1997-47, 6.

(56) Est. of Otis C. Hubert, 117 Sup. Ct. 1124 (1997)(79 AFTR2d 97-1394, 97-1 USTC [paragraph] 60,261), aff'g 63 F3d 1083 (11th Cir. 1995)(76 AFTR 2d 95-6448, 952 USTC [paragraph] 60,209), aff'g 101 TC 314 (1993); see Zysik, "Significant Recent Developments in Estate Planning," 28 The Tax Adviser 500 (August 1997), p. 503.

(57) Est. of Mildred Geraldine Letts, 109 TC No. 15 (1997).

(58) M. Lee Gallenstein, E.D. Ky. 1991 (71A AFTR2d 93-4963, 91-2 USTC [paragraph] 60,088), aff'd, 975 F2d 286 (6th Cir. 1992)(92-2 USTC [paragraph] 60,114).

(59) Joy B. Patten, 116 F3d 1029 (4th Cir. 1997)(80 AFTR2d 97-5108, 97-2 USTC [paragraph] 60,279).

(60) Therese Hahn, 110 TC No. 14 (1998).

(61) IRS Letter Ruling 9809030 (11/24/97).

(62) IRS Letter Rulings 9802032-9802034 (all dated 10/14/97), 9741040 (7/15/97), 9748010 (8/14/97), 9718009 (1/28/97) and 9713008 (12/10/96).

(63) IRS Letter Ruling 9803013 (1/1/97); see also IRS Letter Ruling 9641030 (7/16/96).

(64) IRS Letter Ruling 9741001 (6/18/97).

(65) See IRS Letter Ruling (TAM) 9707001 (10/25/96); Zysik, note 56, pp. 502-503.


* Final Sec. 2518 regulations now allow a joint tenant to disclaim jointly held property not unilaterally severable on the same basis as joint property unilaterally severable.

* In Wheeler, the Fifth Circuit held that the sale of a remainder interest at actuarial value was for full and adequate consideration and did not result in a taxable retained interest under Sec. 2036(a).

* Eisenberg held that a donor could not reduce the value of gifted stock to reflect the built-in capital gains taxes that would be incurred if the corporation liquidated and sold its assets.
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Title Annotation:part 2
Author:Zysik, Jeff
Publication:The Tax Adviser
Date:Sep 1, 1998
Previous Article:Understanding the "origin-of-the-claim" doctrine.
Next Article:Staffing the accounting firm in the new millennium.

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