Wednesday, October 30, 2013
The U.S. Tax Court in Steinberg v. Commissioner, 141 T.C. No.8 (2013) ruled that the value of a taxable gift can be reduced if the donee pays the resulting estate tax if the donor dies in the three years of making a gift. The donee will agree to pay the gift tax that is added to what can be taxed in the estate.
In the case, the individual who received the gift agreed by a signed writing to pay any outstanding estate tax that stemmed from the gift if the donor died within three years. The donor filed Form 709 claiming that the value of the gift subtracted by an estimated amount of estate tax would arise if the donor died within three years based on the "actuarial value of the donor's survival." The court reasoned that a willing purchaser would want the price lowered to compensate for the risk of becoming responsible to pay the estate tax.
See Kelly Humke, Reduce Gift Taxes With A Donee's Written Promise, Wealth Strategies, Oct. 24, 2013.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.