Section 9 Estate Tax Issues

• Library: Business Transitions 2009 Supp

The specific citations for the two bulleted items in the second paragraph of the original section are as follows:

• the right to possession or enjoyment of, or the right to the income from, the property transferred, I.R.C. § 2036(a)(1); or

• the right (either alone or in conjunction with any person) to designate the persons who can possess or enjoy the property or its income, § 2036(a)(2)

Delete the fourth paragraph of the original section and replace it with the following:

When a senior family member transfers an interest in the family business but retains a disproportionate amount of the income or maintains voting control over the stock transferred, I.R.C. § 2036 can be used to include the entire value of the interest transferred to the senior member’s estate. See, e.g., Estate of Schauerhamer v. Comm’r, T.C. Memo 1997-242 (1997). The IRS has had some success arguing that assets transferred to a family limited partnership (FLP) should be included in the transferor’s gross estate under this argument. See:

• Estate of Hurford v. Comm’r, T.C. Memo 2008-278 (2008)

• Estate of Bongard v. Comm’r, 124 T.C. 95 (2005)

• Estate of Bigelow v. Comm’r, 503 F.3d 955 (9^th Cir. 2007), aff'd, T.C. Memo 2005-65 (2005)

• Estate of Reichardt v. Comm’r, 114 T.C. 144 (2000)

• Estate of Harper v. Comm’r, T.C. Memo 2002-121 (2002)

• Strangi v. Comm’r, 429 F.3d 1154 (5^th Cir. 2005), aff'd
  T.C. Memo 2003-145 (2003) (...