Recent Cases
 Failure to Elect to Defer Recognition of Gain Upon Sale of Stock to ESOP Causes Taxation in Year of Sale
Failure to report the sale of majority owner's shares in his business to the company's ESOP on the seller's tax return for the year in which he sold the shares triggers recognition of capital gain in the year of sale—deferral of gain denied regardless of mitigating circumstances.
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Failure to Coordinate Tax Provisions of Will and Revocable Trust Cause Payment of Estate Taxes From Marital Trust, Thereby Reducing Marital Deduction.
Decedent had a very large estate, a complex set of trusts and a will. The case deals with the following issues :
1. Whether his revocable trust instrument establishes that decedent intended for Federal estate tax and legal costs to be paid out of property in the revocable trust that would otherwise pass to decedent's surviving spouse.
2. Whether, Illinois law governs in determining decedent's intent expressed in his revocable trust instrument regarding whether Federal estate tax and legal costs are payable out of property in the revocable trust that would otherwise pass to decedent's surviving spouse.
3. Whether the marital deduction is reduced under section 2056(b)(4) by the amount of Federal estate tax paid by the revocable trust with property that would otherwise pass to decedent's surviving spouse.
Read the Case (Estate of Lurie v. Comm., T.C. Memo 2004-19)
5th Circuit reverses Kimball ruling on Sec. 2036 "adequate consideration" test.
IMPORTANT CASE!
On May 20 th , the U.S. 5 th Circuit Court of Appeals ruled that assets transferred to a limited liability corporation and then to a family limited partnership should not be recaptured into the value of the decedent's estate under IRC section 2036(a) because the transfers were made pursuant to bona fide sales and thus came under the exemption from 2036(a) which states that such assets must be included in all events “except in case of a bona fide sale for an adequate and full consideration in money or money's worth.”
The opinion, which is 22 pages long, gives an excellent analysis of what constitutes a “bona fide sale” and “adequate and full consideration” and provides a detailed examination of applicable case law that applies to this important area.
This case should be read in conjunction with the H&K article Family Limited Partnerships as Estate Planning Vehicles: All Vehicles Should Be Driven Defensively” which was included in the March Case Analysis Newsletter.
Read the Case (David A. Kimbell, Sr., Independent Executor Under The Will Of Ruth A. Kimbell, Deceased, vs. United States Of America, 5th Cir. No. 03-10529) |
