Article on Estate Tax Values

Calvin H. Johnson (Andrews & Kurth Centennial Professor of Law, University of Texas at Austin School of Law) and Joseph M. Dodge (Stearns Weaver Miller Weissler Alhadeff & Sitterson Professor of Law, Florida State University College of Law) recently published their article entitled Passing Estate Tax Values Through the Eye of the Needle, 132 Tax Notes, 939 (August 2011). The abstract available on SSRN is below:

The taxable estate is the value of assets at the moment of death or other valuation date. Routine estate planning claims discounts of 30 to 60 percent of the value of the property through temporary, self-imposed restrictions or arrangements that will lapse or that heirs can undo. The wealth transferred to heirs is better measured by ignoring the self-imposed temporary restrictions that reduce value. We should be skeptical that self-imposed restrictions permanently affect the wealth transferred to heirs; if they do, the law should not encourage it. Section 2704(b) has proved inadequate to prevent this technique. Under this proposal, value-reducing restrictions or arrangements added by the decedent or on his behalf would be ignored in transfer tax valuation. The lapse of a restriction that originally reduced transfer tax value by a material amount would be a taxable transfer subject to supplemental transfer tax that would be a proxy estate tax.