Uncashed checks may forfeit transfer tax benefits
Article Abstract:
A gift check could lose its transfer tax benefits if the recipient does not cash it before the donor's death. Under the 'relation-back doctrine,' a gift check may be considered cash paid on its delivery date only when it is given for valuable consideration in an arm's-length transaction between parties who are not related and the recipient later cashes the check in the normal course of business. The IRS questions the applicability of this doctrine when the gift check is given to related or controlled parties, or made for no consideration. It considers gift checks given to noncharitable beneficiaries complete only upon their encashment. Most courts also refuse to apply the 'relation-back doctrine' to noncharitable gift checks. However, the doctrine could apply if there are factors that would warrant a finding of relation back, such as when the value of the gift check has been irrevocably debited or set aside from the taxpyer's assets.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1995
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Heirs may face open-ended liability
Article Abstract:
An estate transfer may subject the heir to estate tax liabilities greater than the amount of the bequest. Under Sec. 6324(a)(2), a beneficiary of the estate may be held personally liable for the tax corresponding to the value of the property transferred to the heir that was included in or received from the estate. Sec. 6901(a) further grants authority to the IRS to assess the estate's unpaid taxes against the transferee. These two sections are generally seen by the courts as alternative theories that the IRS may use to impose estate tax liability on transferees. Thus, it is permissible for the Service to go after an estate beneficiary in accordance with Sec. 6324(a)(2) even if no estate assessment has been made against the transferee and the assessment period has already ended. Measures for protecting estate beneficiaries are discussed.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1995
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TRA '97 eases the estate and gift tax burden
Article Abstract:
The Taxpayer Relief Act (TRA) of 1997 contains provisions easing estate, gift and trust tax burdens that can be used by moderate-sized estates to reduce their transfer taxes. For instance, middle-to-upper-income taxpayers can take advantage of the higher exclusion amount and the exclusion of the inflation-indexed annual gift tax. These two provisions also enable married individuals to transfer a minimum of $2 million to their heirs free of transfer tax. Furthermore, the provisions on small business tax are also friendly to taxpayers who own family businesses or farms and who may have been compelled to sell these properties to settle their estate taxes in the past. Although TRA 1997 does not eradicate recordkeeping rules for transfer tax, it can help taxpayers minimize their tax burdens for transfers in greater amounts.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1997
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