Internal Revenue Rulings
 Rev Rul 2004-64 – It's Official! IRS (finally) confirms no gift tax liability in Grantor Trusts,… but adds new estate tax twist
IMPORTANT CASE!
This ruling settles the hoary question (weakly posed by the IRS, but quickly retracted) of whether the payment of income taxes by the Grantor of a Grantor Trust is a gift to the trust beneficiaries. We now know it isn't. The ruling discusses three scenarios, and focuses on the reimbursement provision in various contexts.
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IRS issues new Regulations under Section 2702 consistent with the Walton decision
The IRS has come up with amendments to the regulations under Section 2702 to conform its infamous Example 5 to that decision.
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GST Attributes not Lost by Court Order Directing Sale of Assets Owned by S-Corporation Held in Two Irrevocable Trusts
Two irrevocable trusts held all of the stock of an S corporation that owned certain residential property used by the beneficiaries. The beneficiaries got a state court order compelling the trustees to sell the properties and reinvest the proceeds in income producing properties.
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GST Exempt Trust Split Into Sub-Trusts Retains Grandfathering Settlor created an irrevocable trust (the “Settlor's Trust”) that in turn created four separate equal trusts (the “Children's Trusts”), one for the benefit of each of Settlor's children. The income of each of the Children's Trusts could be distributed to its beneficiary before the age of 21 if the corporate trustee deemed it necessary, but otherwise would be accumulated for the beneficiary until age 21, and thereafter would be payable for the balance of his or her life.
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Taxpayer Granted Extension for Filing Seven Years of Gift Tax Returns to Allocate GST Exemption
Taxpayer, upon the advice of her accountant and attorney, established a trust for the benefit of her children and their issue. The trust was intended to be exempt from the GST tax. Taxpayer's attorney informed her accountant of the need to file annual gift tax returns to allocate GST exemption to the Trust.
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Arm's Length Settlement Between Beneficiaries (Spouse and Charity) Allows Property to Qualify For Marital Deduction
Decedent and his wife had entered into pre-nuptial and post-nuptial agreements; the post-nuptial agreement was executed after the husband created a lifetime QTIP trust that was to be funded upon his death if his wife survived him. The ultimate recipient of the husband's estate was to be a charity.
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