Fifth Circuit Reverses McCord
Yesterday (August 22, 2006), the Fifth Circuit has reversed the Tax Court on defined value clauses, in McCord v. Comm’r, No. 03-60700 (5th Cir., Aug. 22, 2006).
The following summary is courtesy of Howard Zaritsky:
They held that the gift tax consequences of the taxpayer gift of a specific dollar amount of partnership interests had to be determined on the date of the gift, rather than the date two months later when the donees decided how to apportion the gift among themselves. The court also agreed that the transfer was calculated as a net gift with respect to the donees agreement to be liable for the estate taxes that would be imposed if the donors died within three years of the date of the gift.
If this became the generally accepted rule, it would free many donors from uncertainty regarding the gift tax implications of gifts of hard-to-value assets, such as real estate, partnership interests, closely-held stock, artwork, antiques, and the services of trusts & estates attorneys.