Gift Tax Planing Considerations

Question 1

Step Transaction Relating to Family Entities

Answer 1

Need to have independent significance between transactions. If funding LLC and transferring LLC interests to quickly, will be collapsed to just a gift of funded property. Windows as large as 42 days have been collapsed by TC and 8th Circuit, but time windows as small as 6 days have been deemed to have independent significance by the TC.

Question 1

Indirect Gifts Through Business Entities

Answer 1

Difference between property contributed to a corporation and consideration received treated as gifts to other Shareholders.

Pierre v. Commissioner (2009) is tax court case ruling that gifts of LLC interests are treated as such (allowing discounts) rather than gifts of partial interests in partnership property.

Question 2

Validity of Conditions Subsequent

Answer 2

Conditions subsequent to the initial gratuitous transfer that are introduced for the purpose of avoiding the imposition of the gift tax violate public policy and are generally not recognized.

Commissioner v. Proctor (4th. 1944) is landmark case not recognizing clause stating that in the event of a final order determining any portion of a transfer in trust constituted a gift, that portion of the property would automatically not be included in the conveyance and remain property of the taxpayer.

Question 3

Validity of Defined Value Transfers

Answer 3

Courts have distinguished defined value transfers and transfers with conditions subsequent. This allows us to transfer LLC units with formula clauses for adjustments in the event of appraisals and IRS/court redeterminations.

Question 4

Assumption of Gift Tax Liability by Donee

Question 5

Ass

Question 6

Assumption of Estate Tax Liability by Donee