Continuing to look a gift horse in the mouth: state death taxes and IRC section 6166

Article Abstract:

IRC section 6166, in combination with section 303, was designed to help closely-held and family-owned businesses avoid liquidity problems when being passed from one generation to the next. However, the section does not help liquidity problems associated with state death taxes, which can be up to 50% of the federal tax, and a business could be taxed in more than one state depending on whether the business had significant contacts. Therefore, life insurance is still a better planning method unless the business owner is deceased or uninsurable.

Taxation, Close corporations, Closely held corporations, Family-owned business enterprises, Family-owned businesses

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Renewal commissions and other income items as gifts to charity at death

Article Abstract:

Insurance agents' renewal commissions and other income 'in respect of a decedent' is significantly diminished after taxation and involves complicated administrative methods. Therefore, the best way to handle these income types is to bequeath them to a qualified charity because the income is then not taxable for the decedent, estate or charity, and the charity incurs all the administrative costs.

Planning, Distribution of decedents' estates, Charitable contributions, Charitable donations

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Sales of remainder interests: reconciling Gradow v. United States and section 2702

Article Abstract:

Transfers of remainder interests in property must be bona fide and made for adequate consideration to avoid both gift and estate taxation. For gift tax purposes, the remainder must be transferred for the actuarial value of the interest. For estate tax purposes under IRC section 2036(a), the transfer must be bona fide and lacking any donative purpose, as well, to avoid inclusion in the estate.

United States, Valuation, Remainders (Estates)

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