Court Opinion

ID: 4474884
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:11:11.138906+00
Date Added: 2024-06-11T14:53:52.816325
License: Public Domain

Swift, J., concurring in part and dissenting in part: On the public policy argument, I agree with the majority opinion. As to the technical disclaimer issue under section 2518 relating to the trust annuity, I believe the regulations, read carefully and properly, along with a number of IRS private letter rulings, would treat the disclaimer Hamilton made in favor of the trust annuity as a qualifying disclaimer. Section 25.2518-2(e)(3), Gift Tax Regs., describes in the flush sentence and in subdivision (i) exactly the partial failure that is applicable to Hamilton’s disclaimer, as follows: § 25.2518-2. Requirements for a qualified disclaimer. — • ^5 # ‡ H< # (e) Passage without direction by the disclaimant of beneficial enjoyment of disclaimed interest.— * * * t * * * * (3) Partial failure of disclaimer. If a disclaimer made by a person other than the surviving spouse is not effective to pass completely an interest in property to a person other than the disclaimant because— (i) The disclaimant also has a right to receive such property as an heir at law, residuary beneficiary, or by any other means; and (ii) The disclaimant does not effectively disclaim these rights * * * Because Hamilton did not also disclaim her contingent remainder interest in the trust property (valued by petitioner and by respondent under respondent’s annuity tables at $434,156),1 under the above regulatory provision there occurred a partial failure of Hamilton’s disclaimer. The next clause in section 25.2518-2(e)(3), Gift Tax Regs., describes the effect that the partial failure of Hamilton’s disclaimer has on the interest in the trust property, as follows: (3) Partial failure of disclaimer. — • * :{j * * * * the disclaimer is not a qualified disclaimer with respect to the portion of the disclaimed property which the disclaimant has a right to receive. * * * [Emphasis added.] The portion which Hamilton has a right to receive is only the contingent remainder interest, and therefore, under the above clear and express language of the regulations, it is only that portion or interest that is to be treated as disqualified. Only under the second sentence of the above subparagraph (3) could the trust annuity interest (which Hamilton does not have a right to receive) be tainted and also be treated as disqualified. The second sentence of section 25.2518-2(e)(3), Gift Tax Regs., provides as follows: (3) Partial failure of disclaimer. ******* If the portion of the disclaimed interest in property which the disclaimant has a right to receive is not severable property or an undivided portion of the property, then the disclaimer is not a qualified disclaimer with respect to any portion of the property. * * * [Emphasis added.] Thus, all of the $2,421,671 passing to the trust (i.e., not only the $434,156 reflecting the agreed 18-percent value of the retained contingent remainder but also the $1,987,515 reflecting the agreed 82-percent value of the annuity) is to be treated as disqualifed only if the disqualified contingent remainder is not severable from the annuity. With regard to severability, section 25.2518—3(a)(1)(ii), Gift Tax Regs., provides that to be treated as severable property the separate interests must maintain “a complete and independent existence.” I see no reason the fixed annuity and the remainder before us could not and would not be treated as independent of each other. The severable nature of a fixed dollar, fixed term annuity such as that involved herein and a remainder are well established by the Commissioner’s own regulations and ruling position. See section 20.2055-2(a), Estate Tax Regs., and section 25.2522(c)-3(a), Gift Tax Regs., both of which expressly state with regard to remainder and other interests that the key to whether property interests are to be treated as sever-able interests is whether separate values for each property interest are presently ascertainable.2 See IRS private letter rulings Priv. Ltr. Rul. 2000-27-014 (Mar. 31, 2000), Priv. Ltr. Rul. 1999-27-010 (Apr. 6, 1999), Priv. Ltr. Rul. 96-35-018 (May 29, 1996), and Priv. Ltr. Rul. 96-31-021 (May 3, 1996), each of which treats, in the case of charitable remainder trusts, the remainder as having an ascertainable value, as severable, and as deductible; and in the case of charitable lead trusts, the fixed annuity as having an ascertainable value, as severable, and as deductible. Accordingly, the $1,987,515 value of the trust annuity that Hamilton did disclaim is to be treated as severable from the $434,156 value of the contingent remainder interest not disclaimed. Judge Kroupa’s dissenting opinion persuasively explains this point further. For the reasons stated, I dissent as to part I of the majority opinion. Kroupa, J., agrees with this concurring in part, dissenting in part opinion.   For purposes of this side opinion, I disregard the relatively small value of the foundation’s contingent remainder interest in the trust that stands behind Hamilton’s contingent remainder interest therein should Hamilton die during the 20-year term of the trust.    For example, sec. 20.2055-2(a), Estate Tax Regs., provides as follows: § 20.2055-2. Transfers not exclusively for charitable purposes. — (a) Remainders and similar interests. — If a trust is created or property is transferred for both a charitable and a private purpose, deduction may be taken of the value of the charitable beneficial interest only insofar as that interest is presently ascertainable, and hence severable from the noncharitable interest.