Heckerling
Institute 2005
Reports from the event, as
posted to the ABA-PTL List Serve |
=========================================================
This Report contains coverage of Rev. Rul 2004-64 courtesy of the
Leimberg Estate Planning Email Newsletter
==========================================================
Since we are still waiting for the last of the reports from Miami
Heckerling, we are including in this Report excerpts from a recent
Newsletter from the Leimberg LISI Email Newsletter service with
the permission of Steve Leimberg. This is an excellent e-mail service
that currently costs $19.95 per month. Steve has been a reporter
for us and a speaker at Miami in the past.
Steve Leimberg's Estate Planning Email Newsletter - Archive Message
#769
Date 17-Jan-05
From Steve Leimberg's Estate Planning Newsletter Subject Rev. Rul.
2004-64 - Special Report - IRS Powerboosts Intentionally Defective
Grantor Trusts
LISI Commentator Keith Schiller has prepared a special report on
Rev. Rul.
2004-64 and its impact on Intentionally Defective Grantor Trusts
(IDGTs)
for Leimberg Information Services members.
Keith notes that, while Intentionally Defective Grantor Trusts
(IDGTs) are
not for the faint of heart, they received a significant estate,
gift and
income tax boost when the Service issued Rev. Rul. 2004-64.
Keith's article reviews the advantages, uses and areas of concern
with
IDGTs, and recommends that the suitability of the client for implementation
of an IDGT be weighed carefully. Several open legal issues exist
with this
estate tax strategy that will receive additional attention as a
result of
this ruling.
Because of the length of Keith's report, we've posted it directly
to our
LISI site rather than sending it to you. It's waiting for you as
Estate
Planning Newsletter # 768 at http//www.leimbergservices.com (Just
log in
and look under Recent Entries).
Ed Also due to the length of this report, we are only including
a part of
it here. For the full report, go to the LISI Web site and subscribe
to
this service.
Steve Leimberg's Estate Planning Email Newsletter - Archive Message
#768
Date 17-Jan-05
From Steve Leimberg's Estate Planning Newsletter
Subject Rev. Rul. 2004-64 - IRS Powerboosts Intentionally Defective
Grantor
Trusts
LISI Commentator Keith Schiller is the shareholder of the Schiller
Law
Group, a Professional Law Corporation, of Orinda, California . We'd
like to
thank Carol Raimondo , CPA, Torrance, CA, and April Green , CPA,
Carmel, CA
for their review of this special LISI commentary.
Keith notes that, while Intentionally Defective Grantor Trusts
(IDGTs) are
not for the faint of heart, they received a significant estate,
gift and
income tax boost when the Service issued Rev. Rul. 2004-64. (See
commentaries by Larry Katzenstein in Estate Planning Newsletter
# 697 , Bob
Keebler in Employee Benefits and Retirement Planning Newsletter
# 258,
Steve Akers in Estate Planning Newsletter # 738, and David Shaftel
in
Estate Planning Newsletter # 7452 at http//www.leimbergservices.com
)
Not only is the grantor's payment of income tax on income generated
by the
IDGT not an additional gift, but the payment of that tax by the
grantor
will not cause IRC Section 2036 inclusion of the IDGT in the grantor's
estate provided the grantor is required to pay the income tax. Section
2036
inclusion results if the trust must pay the income tax. Estate tax
caution
is advised if a trustee (independent) would have discretion to pay
the
income tax.
EXECUTIVE SUMMARY
This article reviews the advantages, uses and areas of concern
with IDGTs,
and recommends that the suitability of the client for implementation
of an
IDGT be weighed carefully. Several open legal issues exist with
this estate
tax strategy that will receive additional attention as a result
of this
ruling.
REV. RUL. 2004-64 – WHAT IT SAYS, WHAT IT MEANS
In what may be the most significant non-legislated estate tax savings
development in recent years for the most wealthy, the IRS supported
a
double boost for intentionally defective grantor trusts ("IDGTs")
when it
issued Rev. Rul. 2004-64, 2004-27 I.R.B. 7. This ruling overrides
several
prior private letter rulings of a conflicting nature and outcome.
(PLRs
9109001, 9444033 (a GRAT); 9504021, 9416009, 9413045 and 9352004).
First, the Service ruled payment of income tax by the grantor that
arises
from the trust's income is not a gift by the grantor.
Second, the Service provided a roadmap on how to avoid inclusion
in the
gross estate of the grantor for estate tax purposes under Code Section
2036
relative to whether or not the trust cannot, may, or must reimburse
the
grantor for tax arising from income generated by the trust. In a
nutshell,
grantors of a properly-structured IDGT are encouraged to pay the
income tax
arising from the trust and may achieve significant gift tax savings
and
income shifting for the benefit of their children, grandchildren,
or other
loved ones.
The Service concluded that no portion of the IDGT will be included
in the
gross estate of the grantor under Section 2036 if the grantor must
pay the
income tax of the IDGT without reimbursement from the trust.
PROHIBIT MANDATORY REIMBURSEMENT
However, a retained interest and gross estate inclusion will arise
under
Section 2036 if the trust must reimburse the grantor for the income
tax
liability that the grantor incurs. Mandatory payment obligations
could
arise under the terms of the trust or state law.
The IDGT, therefore, should expressly prohibit such payments while
it is an
intentionally defective grantor trust, if this approach to avoiding
Section- 2036 inclusion is preferred. Finally, gross estate inclusion
may
arise if the independent trustee has discretion to reimburse the
grantor
for income taxes and there was a pre-existing agreement to reimburse.
This
third prong encourages a fact and circumstances analysis on a case-by-case
basis.
Each of the examples in the ruling assumed the use of an independent
trustee. Even with an independent trustee, many clients may find
the
approach under which the trustee has discretion to reimburse the
grantor
for income taxes arising on income received by the trust to be too
risky an
approach given the large estate tax savings potential with an IDGT.
As
noted below, other alternatives exist if the grantor cannot afford
to
continually pay tax on income he or she is not receiving.
THE CONCEPT IN THE REAL WORLD
We begin with the best… an illustrated benefit of this ruling
with the
application of several rules discussed in this article before reviewing
the
purpose, background, and general positives and areas of concern
with IDGTs.
The following is a realistic example that should not pierce the
envelope of
estate, gift or income tax principles
IlustrationT owns rental real estate with a fair market value of
$10
million without debt. T creates six IDGTs in October, 2004, one
for the
benefit each of his two children and four grandchildren. The property
has a
net operating income of $900,000 per year and generates $850,000
in cash
flow, after reserves.
T sells a 5% undivided interest in the real estate to each IDGT.
Assuming
that a 20% fractional interest discount applies to each 5% share,
each
share carries a $400,000 sales price ($10 million x 5% = $500,000
x .8=
$400,000).
Each note is interest only for 9 years (maximum mid-term rate)
with the
balloon payment at the end of the term and is secured by a deed
of trust.
(The beneficiaries might guarantee the loans or the grantor may
gift some
funds to establish a trust equity. See, discussion, infra.)
Applying the 3.62% AFR to each 5% share generates an annual interest
payment of $14,480 on the $400,000 sales price while the 5% interest
in the
property yields $42,500 in cash flow on taxable income of $45,000.
Depending upon whether or not T resides in a state with state income
tax, T
will pay income tax at a rate between 35-44% on the $45,000 of taxable
income, removing an additional $18,000 (at an approximate,
average-effective rate of 40%) from T's estate.
This creates a $46,020 wealth shift for each trust, or $276,120
from all
six the trusts, and does so without a taxable gift. Of this annual
wealth-transfer savings, $108,000 arises from the income tax treatment
favored by the new ruling.
If T survives 10 years from the establishment of the IDGT, over
$2.76
million, plus the growth on the transferred interest in the real
property,
will have been removed from T's gross estate.
If estate tax is repealed, the IDGT will also have diverted $2.76
million
of cash flow to loved ones who are likely in lower income tax brackets.
For
additional estate-tax protection, T should file a gift tax return
in the
year of the sale, reporting no gift while making adequate disclosure
of the
transfer.
WHERE DOES THE MONEY TO PAY THE INCOME TAX COME FROM?
Some clients may ask, "What if I cannot afford to pay the
income tax on
income that I am not receiving?" There are several plausible
responses
(1) Include a provision in the trust authorizing a termination
of the
defective trust character of the trust and bring the trust under
general
fiduciary income tax principles so that the trust will thereafter
pay its
own income tax.
(2) Grant an independent trustee discretion to reimburse the grantor
for
income taxes and hope that the IRS will not be successful in its
likely
argument that a pre-arranged deal exists or was evident from a pattern
of
conduct under Section 2036.
(3) Advise the client that these trusts are best suited for individuals
who
have so much income and wealth that the potential for payment of
income tax
is not a concern. (In this respect, an IDGT is like dating Uma Thurman
or
George Clooney. If you lack confidence, don't seek the date.)
(4) Rather than creating an IDGT, wait until a parent dies and
make a
direct sale by the surviving parent to the loved ones when the gifted
property has received a step-up in basis. This will minimize or
eliminate
the need for an IDGT from the standpoint of recognition avoidance
on sale
because there is little or no gain. The trust could then be structured
as a
standard trust. This strategy benefits the younger generation when
the cash
flow on the asset sold is greater than the payment required on the
promissory note, while enabling the grantor/seller to not have to
pay
income tax on income that others receive.
IDGTs thread the eye of the needle… the gap between the potential
benefit
of wealth and income shifting to loved ones with a power that is
broad
enough to achieve the desired tax result, without running afoul
of the
gross estate rules that would doom the trust to inclusion in the
decedent's
estate under Code Sections 2036 or 2038. Estate planners must assess
the
suitability of their client for this level of planning.
PURPOSE AND BACKGROUND OF IDGTs
An IDGT is generally designed to remove its assets from the gross
estate of
the grantor for estate tax purposes while having its income taxed
to the
grantor (i.e., a grantor trust). The trust is "defective"
because grantor
income tax rules apply to the trust yet the trust is outside of
the
grantor's estate for estate tax purposes.
As discussed below, the law distinguishes between defects that
apply to
income and those that apply to corpus transactions (such as sales
or other
capital gain events). If the trust is defective only as to its income,
the
grantor will be income taxed on the income, but gains on sales or
exchanges
or other events of a principal nature will be taxed to the trust
under
normal fiduciary income tax rules. Such a trust would not be fully
defective.
IDGTs have long been popular in the following planning contexts(1)
life
insurance trust; (2) wealth shifting and other benefits not available,
or
available to a lesser extent, with a Grantor Retained Annuity Trust
("GRAT"); (3) avoidance of the Estate Tax Inclusion Period
("ETIP") rules
when the trust has skip persons as beneficiaries; (4) an entity
to which
the grantor can sell an asset with the ability to avoid the current
recognition of gain; (5) ownership of S Corporation stock; (6) pass-through
of tax incidents with partnerships; (7) deduction of interest and
property
taxes; and (8) net operating losses on the grantor's income tax
return
rather than on the trust's Form 1041.
Rev. Rul. 2004-64 provides significant planning security for planners
and
their clients in the handling of the income tax payment while providing
additional estate and gift tax savings in the process.
SUITABILITY TESTING NECESSARY
IDGTs provide a general risk to clients because they are not blessed
by any
statute. They owe their existence to IRS rulings and case law. As
a result,
they may be eliminated by an act of Congress or a change in IRS
position.
As a consequence, they are not for clients who are risk adverse
regarding
estate planning.
Moreover, IDGTs are more suited for the most wealthy of clients
(i.e.,
those who can afford to make an irrevocable gift or sale and, generally,
pay the income tax on income they are not receiving).
From my experience, IDGTs, outside of the life insurance trust
context,
tend not to be attractive or suitable for clients with estates under
$15
million. In addition, IDGT planning necessitates that the client
to make an
estate planning investment that will be considerably greater than
is
typical of basic estate planning, living trusts, and GRATs.
While IDGTs rely on their existence from case law and rulings,
Rev. Rul.
2004-64 reflects a trend that supports such planning. IDGTs also
received
an implied boost from the 2001 Tax Act. That Act amended Code §
2511(c) to
read as follows after December 31, 2009
"(c) Notwithstanding any other provision of this section and
except as
provided in regulations, a transfer in trust shall be treated as
a transfer
of property by gift, unless the trust is treated as wholly owned
by the
donor or the donor's spouse under subpart E of part I of subchapter
J of
chapter 1." (Emphasis added.)
This section was enacted as a protection against the use of trusts
as a
means of avoiding income tax, by requiring grantor trust treatment.
It
reflects a recognition of defective trusts, albeit after the year
2009, as
a legitimate tax-planning tool. Following the enactment of the 2001
Tax
Act, the author spoke with Elizabeth Paris of the Senate Finance
Committee
Staff regarding the above language and was informed that it could
be read
as implied support for IDGTs.
HOW TO MAKE A TRUST DEFECTIVE
Defective trusts can be treated as grantor trusts as to income
or
gains/losses on sales and exchange, or as to both ordinary income
and sales
or exchanges. (See, generally BNA Folio 858-2nd, Grantor Trusts
Sections
671-679, Section XIII) The Service will no longer rule on whether
or not a
trust is defective. (Rev. Proc. 96 3, Section 5.21, 1997 1 I.R.B.
84.)
The following is brief list of powers that may make a trust defective,
as
to income and/or gains/losses
1. Premium Payment Power.
Code §677(a)(3) provides that the grantor is taxable as the
owner of any
trust or trust portion as to which the grantor or a non-adverse
person (or
both) may apply trust income to the payment of premiums on policies
of
insurance on the life of the grantor or the grantor's spouse. On
the other
hand, this power to pay the premiums and/or the actual payment of
premiums
does not of itself result in the inclusion of the proceeds in the
insured
grantor's gross estate. (See, PLRs 8118051 and 8126047.) NOTEAs
discussed
below, this power alone would likely not be sufficient to cause
the trust
as a whole to be treated as a grantor trust.
PLR 8126047 allows the entire trust, both as to income and principal
to be
treated as a grantor trust when the trustee may pay the premiums
on the
policy of insurance on the grantor's life first from the net income
of the
trust and then from the principal. The trust also provided that
if these
amounts are insufficient to pay the premiums, the trustee will notify
the
grantor and the grantor may make additional contributions to the
trust. In
addition, the trustee could borrow against the insurance policies
and apply
the loan to pay the premiums due.
Decades-old cases construing pre-Code §677 law concluded that
only that
portion of the trust with respect to which the income was actually
needed
to pay premiums would be treated as a grantor trust, not all of
the income
of the trust even if all of the income could be used for that purpose.
(Iversen v. Comr., 3 T.C. 756 (1944); Weil v. Comr., 3 T.C. 579
(1944),
acq., 1944 C.B. 29.) This older approach was not discussed or followed
in
PLR 8118051, under which the trust document recognized that net
income may
exist in excess of the amount used to pay life insurance premiums.
That
private ruling also treated the entire trust as a grantor trust
even though
the trust only referenced the use of income to pay premiums.
Warning With the caveat noted, an irrevocable life insurance trust
under
which income and principal may be used to pay premiums should be
treated a
fully defective. However, this power may not be sufficiently broad
if the
trust does not include life insurance.
2. Nonadverse Trustee's Sprinkling Power
Code §674 provides that the grantor shall be treated as the
owner of any
portion of a trust in respect of which the beneficial enjoyment
of the
corpus or the income therefrom is subject to a power of disposition,
exercisable by the grantor or a nonadverse party, or both, without
the
approval or consent of any adverse party.
The grantor should be careful not to directly or indirectly control
the
decisions of the trustee (or run the risk of inclusion under Code
§2036 or
§2038). For this reason, caution would limit this power to
income. However,
this would allow the net trust income, but not gains, to be income
taxed to
the grantor. PLR 8103074 treated the entire trust as a grantor trust
under
this nonadverse sprinkling power. That ruling also treated the trust
as a
grantor trust under the premium application noted in approach 1,
above.
3. Nonadverse Trustee's Power to Add Beneficiaries
Under Code §674(b)(5) and (6), a grantor is treated as the
owner of the
trust for income tax purposes if a nonadverse trustee has the power
to add
persons other than after born or after adopted children as trust
beneficiaries, in addition to having discretion to distribute trust
income
and principal. These powers would appear to make the entire trust
defective
as to income and sales events.
In PLR 200030018, the grantor included a power to add charitable
beneficiaries exercisable by an independent trustee to qualify a
charitable
remainder trust as an S corporation shareholder. Grantors should
consider
their comfort zone with allowing a third party to add beneficiaries
to the
trust. Assuming no control or pre-existing agreement between the
grantor
and the non-adverse trustee regarding the exercise or non-exercise
of the
power, the power under this exception should not cause estate tax
inclusion
while allowing the trust as a whole to qualify as a grantor trust
for
income tax purposes. This approach has been considered the safest
in the
course of avoiding estate tax inclusion while having the entire
trust
treated as defective. (See Louis Mezzullo, Installment Sales to
Grantor
Trusts, ABA Tax Section, Mid-Year, 2000, San Diego, Ca.)
4. Payment of Trust Income to the Grantor's Spouse
Code §677(a)(1) imposes grantor status if a non-adverse trustee
may pay
trust income to (or expend it for the benefit of) the grantor's
spouse.
Under this approach, the grantor trust status should end on the
death of
the spouse. (See PLR9321050.)
Caution should also be added that the payment to a spouse can discharge
a
support obligation of the grantor. The trust would need to exclude
such
use. However, consider if community property is being used whether
such an
exclusion(1) would be lawful, (2) would violate fiduciary duties
of the
grantor, and (3) would cause the spouse to be treated as the transferor
as
to one-half, in any event. This defect would likely run to the income
of
the trust, not its capital gain events.
5. Payment of Discretionary Income to the Grantor or the Grantor's
Spouse
Code §677(a)(1) directs grantor trust treatment in the event
a non-adverse
trustee may pay all of the trust income to the grantor, whether
or not
payments are actually made. While this power alone would not compel
estate
tax inclusion under Code §§2036 or 2038, a substantial
risk is run of an
adverse conclusion on this issue, whether as a result of implied
agreement,
or the rights of the grantor's creditors. (See Rev. Rul. 76 103,
1976 1
C.B. 293.) In addition, this defect would likely run to the income
of the
trust, not its capital gain events.
6. Right to Substitute Assets
Code §675(4) imposes grantor status in the event there exists
the retention
of the right, exercisable in a non-fiduciary capacity, to reacquire
trust
assets by substituting assets of equivalent value. This power, along
with
the power of a non-adverse trustee to add beneficiaries (approach
3), may
be the least risky approach to achieve grantor-trust status without
estate
tax inclusion with a non-life insurance trust. If a life insurance
policy
is a part of the trust assets, caution must be inserted to prevent
the
grantor from acquiring the policy. This could give the grantor an
incident
of ownership. The allowance for the "grantor" to acquire
the policy should
be limited to another grantor trust.
This approach also raises issues as to whether or not the power
to
substitute assets is held in a non-fiduciary capacity. If the grantor
is
the trustee, special attention must be paid to avoiding fiduciary
duties
imposed or implied by state law. (See California Probate Code Sec.
16081) .
Rev. Rul. 2004-64 further alerts practitioners to duties imposed
by state
law in view of its reference as to whether or not the fiduciary
has a
state-law duty to reimburse the grantor for income taxes relative
to
Section 2036 inclusion.
In Jordahl Est. v. Comr., (65 T.C. 92 (1975), acq., 1977 1 C.B.
1.) the
court determined that estate tax inclusion did not arise when the
grantor,
in a fiduciary capacity (trustee), had the power to substitute assets
of
equal value, and that this power was not an incident of ownership.
Jordahl
was considered and this rule favorably applied in PLR 9413045, wherein
the
Service ruled that no estate tax inclusion would result merely because
of
the retention of a right to substitute assets at equal value.
SPECIAL POPULARITY WITH LIFE INSURANCE TRUSTS
While IDGTs may be used in a variety of settings, they have received
extensive use with life insurance trusts. This has resulted, in
part, to
avoid the transfer for value rule under Code §101(a)(1) in
the event that
the policy must be transferred. The irrevocability of an IDGT is
drawback.
While amendments may be possible with a court order, or flexibility
infused
with a trust protector, a variety of unknowns can develop though
the years,
when beneficiaries mature or regress to immaturity. Can the trustee
of an
irrevocable life insurance trust transfer the life insurance to
another
trust without incurring the adverse effects of the transfer for
value rule?
Yes, if the transferring trust is "defective." (Swanson
v. Comr. 75-02 USTC
Par.9528 (8th Cir. 1975).
INSTALLMENT SALES BETWEEN A GRANTOR AND A DEFECTIVE TRUST
As indicated in the initial illustration in this article, an IDGT
may be
used to transfer growth and/or cash flow to loved ones. In this
respect, it
can be compared to a Grantor Retained Annuity Trust (GRAT). The
GRAT
provides cash flow to the trust remainder beneficiaries when the
cash flow
exceeds the annuity payment. The IDGT functions similarly, comparing
the
investment cash flow to the note payment.
Under this strategy, a sale is made by the grantor (or a GRAT)
to the IDGT
resulting in no recognition of gain while the trust is in grantor-trust
status. (Rev. Rul. 85-13, 1985-1 C.B. 184; PLR 9535026.) The grantor
would
hold only a promissory note. As part of this planning, a GRAT may
also be
used. In that situation, the GRAT would receive the promissory note.
However, the GRAT would remain subject to GRAT rules and the other
implications of a GRAT discussed below.
If a GRAT is used in conjunction with an IDGT, the grantor would
contribute
growth or high income assets to the GRAT and the GRAT would then
sell to
the IDGT. Otherwise, the grantor would directly sell the growth
or high
income assets to the IDGT .
PLR 9535026 provides an excellent roadmap for use of the installment
sale,
including the use of a long-term balloon payment note, and interest
at the
applicable federal rate.
ADVANTAGES OF AN IDGT OVER A GRAT
The most immediate choice facing client who desire to implement
some form
of retained-benefit plan, is whether to utilize a GRAT or an IDGT.
The IDGT
provides several benefits that can exceed those offered by a GRAT
1. The return to the grantor is based on the applicable federal
rate, which
is lower than the Section 7520 rate required for a GRAT. (Reg. §
25.2702-2(b)(2) . Moreover, a note bearing interest at the AFR does
not
create a taxable gift. (Frazee v. Comr. 98 T.C. 554 (1992).) For
example,
October, 2004, mid-term AFR rate with annual payments was 3.62%
while the
§7520 rate was 4.4%.
2. A GRAT requires payments that are annuitized, not merely interest
only.
(Reg. § 25.2702-2(a)(5). This accelerates the return to the
grantor over
that of an IDGT and puts more money back into his/her estate.
3. A GRAT cannot use a promissory note for the payment of an annuity
while
the IDGT uses a note to establish the obligation. (Reg. § 25.2702-3(d)(5)).
However, even with an IDGT, the tax case may be better served if
the trust
has some equity in the sale and it is not wholly financed.
While there is no direct case law on this point, concern has been
raised
that the lack of equity may reflect a thinly capitalized trust which
will
result in a deemed retained interest by the grantor-seller. (Hesch
&
Manning, "Beyond the Basic FreezeFurther Uses of Deferred Payment
Sales and
Avoiding the Meltdown," 34th Annual Philip E. Heckerling Inst.
on Est.
Plan. ch. 15 (2000); Hatcher & Manigault, "Using Beneficiary
Guarantees in
Defective Grantor Trusts," 92 J. Tax'n 152 (Mar. 2000)).
By point of analogy, the purchase of split-interests in trusts
of general
partnership interests were upheld or found to be retained interests
depending upon whether or not the remainderman had independent equity
to
satisfy the obligation independent of the earnings from the investment.
(PLR 9515039) While the cash-flow from the property may be sufficient
to
sustain the note payment as evidence of its bona fides, the more
cautious
donor may wish to gift some cash to the trust to fund equity or
obtain a
beneficiary-guaranty of the liability.
4. The estate tax inclusion period (ETIP) rules do not apply for
an IDGT
but do apply for a GRAT. (Reg. § 26.2632-1(c)(1).)
5. If the grantor does not survive the retained period with a GRAT,
estate
tax results to the grantor, which include growth in the value of
assets
while they were held in the GRAT. The note from an IDGT will ordinarily
be
included at its fair market value in the estate of the grantor,
which would
exclude the post-sale appreciation on the asset transferred to the
trust in
exchange for the note.
ADVANTAGES OF A GRAT OVER AN IDGT
On the other hand
1. a GRAT is blessed by Code Section 2702 and regulations, (Reg.
§
25.2702-(3)). whereas an IDGT relies on rulings, which can be revoked,
and
the interpretation of court cases. (Rev. Ruls. 85-13 and 77-402;
Madorin v.
Comr., 84 T.C. 667 (1985)).
2. A GRAT is cleaner in its creation because of its regulatory
support and
presence of fewer areas of legal and accounting interpretation.
The 2004 ruling at the commencement of this article sends a hopeful
signal
for the future of IDGTs. However, significant review by Congress
and the
IRS should be anticipated in view of the increased attention that
IDGTs are
receiving and the variety of issues raised in this article.
The grantor should also be alerted to the fact that in the event
gain
becomes recognized as a result of the cessation of grantor-trust
status, or
otherwise, and a sale exists between the grantor and a trust established
by
the grantor-- and the asset sold is property subject to depreciation,
that
the gain recognized is ordinary, not capital gain. (Code §
1239).
<<SNIP>>
SUMMARY
The Service has widened the door for the use of IDGTs with its
recent
ruling, which will likely spawn more interest and use of defective
trusts.
The issues and uncertainties presented herein and suggested in the
materials cited suggest that practitioners and their clients carefully
consider the suitability for this strategy. It offers significant
tax
savings, and its benefits can outlast the repeal of estate tax.
HOPE THIS HELPS YOU HELP OTHERS!
Keith Schiller
Keith Schiller Copyright. 1/05. All rights reserved.
Copyright © 2005 Leimberg Information Services Inc.
_________________________________________
Our on-site local reporters who are present in Miami this year are
Gene
Zuspann Esq. of Zuspann & Zuspann in Denver, Colorado, Shelly
Merritt Esq.,
a solo practitioner in Boulder, Colorado, Connie T. Eyster Esq.
of
Hutchinson, Black & Cook LLC in Boulder, Colorado, Jason Havens
Esq. of
Havens & Miller PLLC in Dustin, Florida, Bruce Stone of Goldman,
Felcoski &
Stone, PA of Coral Gables, Florida, Herbert L. Braverman Esq. of
Walter &
Haverfield LLP in Cleveland, Ohio, and Jeffry L. Weiler of Benesch,
Friedlander, Coplan & Aronoff LLP of Cleveland, Ohio. The editor
again
this year will be Joseph G. Hodges Jr. Esq, a solo practitioner
in Denver,
Colorado who is the Chief Moderator of the ABA-PTL List.
GENERAL INFORMATION ABOUT INSTITUTE
Inquiries/Registration
Philip E. Heckerling Institute on Estate Planning
University of Miami School of Law
Center for Continuing Legal Education
P.O. Box 248087
Coral Gables, FL 33124-8087
Telephone305-284-4762 / FAX305-284-6752
Web site www.law.miami.edu/heckerling
E-mail heckerling@law.miami.edu
===========================================
Headquarters Hotel - Fontainebleau Hilton
4441 Collins Avenue
Miami Beach, FL 33140
Telephone (305) 538-2000, FAX (305) 674-4607
==================================================
NOTICEAlthough audio tapes of all of the substantive session at
the Miami
Institute currently are only made available to Institute
registrants for purchase, the entire proceeding of the Institute
are
published annually by Lexis/Nexis. For further information, go to
their Web site at http//www.lexisnexis.com/productsandservices.
The text of
these proceedings is also available on CD ROM from
Authority On-Demand by LexisNexis Matthew Bender. For further information,
contact your sales representative, or call (800) 833-
9844, or fax (518) 487-3584, or go to http//www.bender.com, or write
to
Matthew Bender & Co., Inc., Attn. Order Fulfillment Dept.,
1275 Broadway, Albany, NY 12204. Note that Special Session, workshop
and
fundamentals program materials are not published.
______________________________________________________
Brought to you by the ABA-PTL Discussion List Moderators
URL for ABA-PTL searchable Web-based Archives
http//mail.abanet.org/archives/aba-ptl.html
To search the ABA-PTL archives online or manage your subscription,
go to
http://mail.abanet.org/archives/aba-ptl.html
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