Sunday, November 30, 2014
Prior to her death, decedent created a private foundation, and through her will left a piece of property to the foundation. Additionally, she left the foundation a remainder interest in another piece of property that she left a life estate to her two children. After the foundation decided that they preferred to receive cash than the property from the estate, and that it was unlikely that they could find a buyer other than the son, the foundation requested a private letter ruling. The issue of the PLR was whether it would constitute self-dealing if the son bought the property since not only was he family of the deceased, but also a trustee of the foundation. The son was also the executor for his mother's estate.
In Private Letter Ruling 201441020, it was held that the transaction would not be considered self-dealing because it falls under an exception in the Treasury regulations, known as the Estate Administration Exception. The exception requires that the executor have the power to sale the property, the sale is approved by a probate court, the sale take place before termination of the estate, the estate must receive at least fair market value, and that the consideration that the estate receives is at least as liquid as what is being sold.
See David A. Handler & Alison E. Lothes, Tax Law Update: December 2014, Wealth Management, Nov. 21, 2014.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.