Tax Law Update: August 2018
Over the past months there have been a couple of important tax law updates that should be highlighted.
- Tax Court rules Internal Revenue Code Sections 2036, 2038 and 2703 applicable to multi-generational split-dollar
On Jule 18, 2018, the Tax Court denied an estate’s motion for summary judgment that IRC Sections 2036, 2038 and 2703 were inapplicable to the multi-generational split-dollar arrangement at issue. Multi-generational split-dollar arrangements typically involve a parent and child (or grandchild). An insurance trust buys a policy on the child, then the parent and the trust enter into a split-dollar agreement. The premium is often front-loaded so that the parent invests a large amount into the policy.
- North Carolina statute taxing New York trust’s income was unconstitutional
The Supreme Court of North Carolina affirmed the North Carolina Court of Appeals decision on June 8, 2018 that a state statute taxing a trust’s income based solely on the residence of the beneficiaries in North Carolina was unconstitutional under the U.S. Constitution and North Carolina Constitution. In The Kimberley Rice Kaestner 1992 Family Trust v. North Carolina Department of Revenue, the sole issue of the case was whether the North Carolina Department of Revenue (NCDR) could tax the income of the Kimberley Trust pursuant to N.C.G.S. Section 105-160.2 during tax years 2005 through 2008. N.C.G.S. Section 105-160.2 allows for the taxation of trust income “that is for the benefit of a resident of [North Carolina].”
See David A. Handler, Patricia H. Ring, & Thomas Norelli, Tax Law Update: August 2018, Wealth Management, July 25, 2018.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.) for bringing this article to my attention.