Source: https://mastroiannilegalblog.wordpress.com/
Timestamp: 2019-04-26 03:57:39+00:00

Document:
The most recent proposed Opportunity Zone regulations, released on April 17, provided clarification as to grantor trusts and transfers at death with respect to the triggering of an inclusion event.
An inclusion event is an event that triggers an investor’s inclusion in previously deferred gain. Generally, the transfer of an investment in a qualified opportunity fund by means of a gift will be treated as triggering an inclusion event of deferred gain.
Note that while an investment owner technically relinquishes such owner’s interest in a qualified investment at death, the investment is treated as income in respect of a decedent (“IRD”) under Code § 691. Such IRD will be triggered later upon disposition.
Curry, Jonathan. Tax Notes Today. Estate Planners Score Points in New O-Zone Regs. Apr. 19, 2019.
The estate’s estate federal estate tax liability was approximately $6.6 million, $4 million of which was paid to the IRS at the time the estate tax return was filed. Because a closely held business accounted for more than 35% of the Decedent’s adjusted gross estate, the estate made a valid election pursuant to Code § 6166(a) to defer payment of the federal estate tax liability with ten annual installments.
Although the estate tax remained unpaid, the trustees of the trust holding the estate’s assets distributed stock from the closely held business to the trust’s beneficiaries. The trust’s beneficiaries signed a Distribution Agreement in which they agreed that they would be responsible for the remaining estate tax liability. The estate, and the trust beneficiaries, failed to pay approximately $1.5 million in federal estate taxes.
U.S. v. Johnson, No. 17-4083, 17-4093 & 18-4026 (U.S. Court of App. Mar. 29, 2019).
In the Matter of the Fund for the Encouragement of Self Reliance, An Irrevocable Trust, 135 Nev. Adv. Op. No. __ (March 21, 2019).
LISI Estate Planning Newsletter #2717 (April 15, 2019) at http://www.leimbergservices.com Copyright 2019 Leimberg Information Services, Inc. (LISI).
Taxpayer’s father-in-law died in 1999, and a Form 706 was filed for his estate. Taxpayer’s husband died in 2002, and a Form 706 was filed for his estate. Taxpayer’s husband was a designated beneficiary on his father’s annuity and IRA. Taxpayer’s husband named Taxpayer as a beneficiary of those accounts upon Taxpayer’s husband’s death.
In 2014, Taxpayer received distributions from both the annuity and the IRA that she included in her gross income. Taxpayer also claimed a miscellaneous deduction for federal estate tax paid.
Income in respect of a decedent (“IRD”) under Code § 691 consists of amounts of gross income which the decedent was entitled to receive at the time of death but were not properly includible in the decedent’s gross income before death, and were received by a taxpayer as the decedent’s successor in interest. For example, when a distribution from an IRA is made in a lump sum to a beneficiary, the portion equal to the value of the IRA on the date of the decedent’s death, less any nondeductible contribution, is income in respect of a decedent and is includible in the gross income of the beneficiary in the year the distribution is received. The recipient of the IRD, here, Taxpayer, is entitled to an income tax deduction equal to the amount of the federal estate tax attributable to the IRD.
Taxpayer argued that she was entitled to a miscellaneous deduction for federal estate tax paid by her father-in-law’s estate attributable to the IRD. However, Taxpayer was the beneficiary of her husband’s accounts, not her father-in-law’s accounts. Her husband’s Form 706 did not include income for these accounts; further, no estate tax was paid on her husband’s estate. Also, the Form 706 for Taxpayer’s father-in-law did not include any of the distributions Taxpayer received and included in her gross income.
Taxpayer was denied the miscellaneous deduction.
Checkpoint Daily Updates. 4.11.19. Code Section 691-Income in respect of decedent-taxation of IRA distributions-proof.
Jill Schermer v. Commission, TC Memo 2019-28.
Deemed Allocation of GST Exemption: Or Is Estate Tax Inclusion Preferable?
With the currently high GST and estate tax exemption amounts, allowing the deemed allocation rule to apply to indirect skip trusts might not be the most tax efficient result. For example, estate tax inclusion in order to achieve the step up in basis under Code § 1014 is often preferable for more modest estates.
Under Code § 2632(e), the balance of GST exemption that is not deemed allocated to direct skips on death will be allocated pro rata to each trust in which a taxable distribution or taxable termination may arise, even if an estate tax return is not required to be filed. This automatic allocation is irrevocable.
See yesterday’s LISI Estate Planning Newsletter #2714 by Keith Schiller for information on planning techniques and post-death cures if the automatic allocation rules are not preferable.
LISI Estate Planning Newsletter #2714 (April 3, 2019) at http://www.LeimbergServices.com. Copyright 2019 Leimberg Information Services, Inc. (LISI).
The term “eligible designated beneficiary” means, with respect to any employee, a designated beneficiary who is (a) the surviving spouse of the employee, (b) a child of the employee who has not reached majority, (c) a disabled individual within the meaning of Code § 72(m)(7), (d) a chronically ill individual within the meaning of Code § 7702(c)(2); or (d) an individual who is not more than 10 years younger than the employee.
A minor child of the employee will cease to be an eligible designated beneficiary upon attaining majority and any remainder of such individual’s interest shall be distributed within 10 years after such date.
LISI 60-Second Planner: Bipartisan Bill Would Raise RMD Age to 72. Leimberg Information Services, Inc.
The ABLE Age Adjustment Act, introduced by Senate Finance Committee member Robert P. Casey Jr., D-Pa., would increase the age requirement for ABLE program eligibility from 26 to 46. Tax Notes. Mar. 21, 2019.
A business trust is eligible for bankruptcy protection, but a donative trust is not. A donative trust is merely a fiduciary relationship, and is not a separate entity for purposes of eligibility for bankruptcy.
The issue was whether the Trust was a business trust or an ordinary donative trust. Here, the primary purpose of the Trust was the management and preservation of assets, rather than conducting a business for profit. Further, the Trust did not file IRS forms as a business entity, but filed trust form 1041.
Because the Court found that the Trust was not a business trust, the Trust was not eligible for bankruuptcy protection.
DeMaio, Andy. LISI 60-Second Planner: “Buck Rogers” Trust Not Eligible for Bankruptcy.
In In re Dille Family Trust, Bankr No. 17-24771-JAD (Bankr. Ct., W.D. Pa. 2/20/2019).
A person listed as a joint tenant with a right of survivorship on bank accounts sufficiently alleged claims for relief against a bank by asserting that the bank removed his name from the accounts without his consent and breached its duty to him as the co-owner of the account by accepting forged signature cards.
The Court concluded that the complaint was sufficient to survive the bank’s motion to dismiss for the following reasons: (1) each joint tenant is deemed an owner of the account; (2) all joint tenants have presumptive equal ownership of account funds; (3) a contractual relationship arises between a bank and joint tenants upon the creation of joint tenancy bank accounts; (4) contracts cannot be modified except upon consent of the parties; and (5) no statute affords banks protection from liability for removing a joint tenant’s name from an account without the joint tenant’s consent.
Estate of Ella Mae Haire, et al, v. Shelby J. Webster, et al, No. E2018-00066-SC-R11-CV. (Tenn. Filed Mar. 20, 2019).

References: § 691
 § 6166
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 § 691
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 § 1014
 § 2632
 § 72
 § 7702
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