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Estate and Gift Tax
Temple University School of Law
Mandelbaum, Kathy

If a term is not defined in the code we would turn to state law. Commissioner v. Bosch [wife had state court opinion that GPA was not a good release] –          state statute is determinative
–          state highest court is determinative
–          everything else is given proper regard
o       depends on the amount of adversity and if the judge was respected
o       the agent stands in the shoes of the appellate court
 
Estate Tax
Transfers – Could decedent pass something along at death?
–          §2033 deals with property that the decedent had an interest
o       Concerned with property passing through probate – could have passed through the instrument of a will
o       Example – I have a property owned w/ brother. If deed is silent as to how it is owned Bosch says to lookto state law.
o       If I had right to use property for life – interest terminates and not taxed under this section at death –
o       If you have a term of years and die during it
§         Would be included under this § if you could give the remainder away
§         Would not if you could not
o       Property has to be beneficially owned
§         Need not own the title of the property – could be the beneficiary of a trust
§         And if you are just title owner may not be taxed – will not tax a trustee
o       Read very narrowly –  Helvering v. Safe Deposit [decedent had GPA but did not use it and trust said where property went if not used] o       Will tax the economic equivalent of outright ownership – the marijuana private letter ruling
§         Man’s estate was taxed with the value of the weed that was in his possession at his last exhale
o       You need a legally enforceable right to the property to have it included in your estate. Estate of Barr v. Commissioner [case where company almost always paid death/ salary wage benefits but was not includible since family could not force them to pay] o        Death settlements are usually not included in the gross estate – Connecticut Bank & Trust Co. v. US If you have a death settlement
§         Revenue rulings after the case say that wrongful death is not included but pain and suffering are
o       Dividends will be includible if you die after the record date but before the issue date – you have a legally enforceable right to it
 
§691
–          says that for income with respect to the decedent [IRD] what we do is
o       tax the income to the estate
o       then tax the remaining to the income
o       comes out to the same amount
 
Gifts
What is a gift?
–          a gift is property that was transferred for less than an adequate and full consideration in money or money’s worth §2512(b)
–          §2501 tells us we pay taxes on gifts
–          §2502 says how to calculate the tax
–          The agreement to marry someone is not adequate or full consideration – Commissioner v. Wemyss
–          The relinquishment of marital rights is also not adequate or full consideration in money or money’s worth – Merrill v. Fahs
–          Rev Ruling 60-160 says that

ack to parent. Applies also to below AFR loans.
§         With term loans you must pay the gift tax all up front – money today is worth more than the money 10 years from now – the difference is what you pay gift tax on
§         Short term = less than 3 years
§         Midterm = 3-9 years
§         Long term = 9= years
 
Disclaimers
–          allows property to bounce off of you and not stick
–          §2518 allows this – very detailed rules
o       Irrevocable
o       Unqualified
o       Immediate
o       In writing
o       Has to go back to the transferor
o       Can’t say where it will go
§         If will is silent look to state law
o       Timely
§         w/in 9 months of transfer
o       has to go to someone other than the person who disclaimed
–          you can partially disclaim
 
When is the transfer complete?
–          a gift in trust is when the transferor gives up the power to revoke Burnet v. Guggenheim and Reg §2.2511-2
–          if you need the consent of someone who is substantially adverse to alter the gift will be complete Camp v. Commissioner
o       substantial adversity is not measured outside the facts of the case and is purely financial
case also shows that