An Unexpected Meaning of Bequest in Black's Law Dictionary Sheds New Light on the IRS's No-Basis Adjustment Ruling for Irrevocable Trusts

The term "bequest" is not straightforward, and its complexity is often overlooked, even by lawyers. Black's Law Dictionary is considered authoritative, and a close reading of its definition is crucial. 

In Rev. Rul. 2023-2, the IRS asserts that assets in an irrevocable trust do not receive a basis adjustment under certain conditions. The ruling relies on the narrow definition of "bequest" from Black's Law Dictionary, omitting the broader definition. 

Taxpayers can, surprisingly, concede the IRS's conclusion but use a second definition to argue that assets in an irrevocable grantor trust qualify for a basis adjustment, as they are considered a "bequest" under IRC § 1014(b)(1). This unexpected interpretation hinges on the broader definition of "bequest" as "money or other property that a person arranges to give to someone or an organization upon death."

For more information see Hani Sarji “An Unexpected Meaning of Bequest in Black’s Law Dictionary Sheds New Light on the IRS’s No-Basis Adjustment Ruling for Irrevocable Trusts”, Wills, Trusts, Estates Information, November 15, 2023.