[Recent Cases] [IRS Rulings] [From Holland & Knight Private Wealth Services Publications]

Welcome to LAWGIC'S monthly Case Analysis Newsletter, a quick and convenient “head's up” report on important cases, rulings and articles relating to wealth transfer planning. This service is free of charge to existing estates and trusts subscribers who renew their subscription prior to their expiration date as well as to all new subscribers for the first year. We will also be offering it as a separate service for $295/year.
 
Of Special Importance to FL Clients

IRS Grants Tax Relief for Florida Hurricane Victims-IR-2004-115, Sept. 10, 2004 (Updated 9/13/04 to add 6 counties)

Internal Revenue Service announced special tax relief for Florida taxpayers in the Presidential Disaster Area that was struck by Hurricane Frances beginning Sept. 3, 2004. It also lengthened the extension period it had earlier granted for the disaster area counties struck by the storms Bonnie and Charley, most of which are also in the latest disaster area.

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Recent Cases

Third Circuit Court of Appeals affirms Tax Court's decision upholding IRS's application of §2036(a) to disregard transfers of assets to family limited partnerships

The Court found that the decedent retained lifetime control and enjoyment of the transferred assets, had an implied agreement at the time of the transfers that he would retain lifetime enjoyment of the transferred assets, and that the transfers were not bona fide sales for adequate and full consideration. Finally, the Court agreed that the family partnerships had no real economic purpose other than to minimize estate taxes.

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Modification Reducing Redemption Share Price Due Majority Shareholder Upon Death Disregarded for Estate Value Purposes

After a buy-sell agreement was executed between a corporation's two shareholders, they transferred shares to an ESOP. One of them died, and his remaining shares were redeemed pursuant to the agreement, leaving only the other shareholder (who held a majority) and the ESOP as shareholders. That shareholder had an amendment prepared to the buy-sell agreement that lowered the redemption price that the ESOP would have to pay upon his death. He died and the estate valued his shares at the lower price.

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Eighth Circuit Rules Withdrawals From Retirement Accounts Taxable, Notwithstanding Mistake in Assignment

Taxpayer's secretary mistakenly gave a bank two retirement annuity contracts to collateralize a loan. When the bank went into receivership, the RTC collected on the policies to pay off the debts, and the taxpayer failed to report the amount recovered as income on his tax return.

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Subsequent Year Financials Use in Valuing Gifted Stock Rejected By Eighth Circuit

A taxpayer gave non-voting shares of a closely held corporation to his heirs, declaring their appraised value to be $.50 per share. The IRS valued them at $1.65, and assessed a deficiency which the taxpayer challenged.

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Internal Revenue Rulings

Conservation Easement Qualifies for Estate Tax Reduction

A man conveyed real property to a revocable trust and after he died the trustee conveyed a conservation easement on the property to a town's conservation fund. The Service ruled that the gift of the easement qualifies for a charitable deduction under Section 2055 (f).

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IRS proposes rules on assigning individuals to particular generations for purposes of the GST tax in cases in which a parent predeceases his or her offspring.

The proposed rules also deal with related issues, such as when an interest in property or a trust is established or derived, and, in the case of a QTIP election, provide that the remainder beneficiary's interest will have been deemed to have been established or derived on the death of the transferor's spouse (the income beneficiary) rather than on the transferor's earlier death. (REG-145988-03)

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9100 Alternate Valuation Date Relief Granted

The attorney hired by a personal representative to manage estate and tax filings filed both federal and state returns three months after their due date, and failed to elect an alternate valuation date under § 2032.

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From Holland & Knight Private Wealth Services Publications

Statutes of Limitations for Malpractice Claims in Estate Planning

The statute of limitations may well be one of the best defenses for estate planners who must guard against malpractice claims that can arise literally decades after the estate planning documents were drafted.

Claims of legal malpractice in estate planning present special problems for practitioners because potential claims may not arise until years or even decades after the alleged malpractice occurred. In most jurisdictions, the potential claimant could be (in addition to the estate planning client) an intended beneficiary who is unborn or unascertained at the time that the estate planning attorney drafts the disputed documents

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