Article on Family Values: An Evaluation of Internal Revenue Code Sections 2703 and 2704(b)

David Berke recently published an Article entitled, Family Values: An Evaluation of Internal Revenue Code Sections 2703 and 2704(b), Wills, Trusts, & Estate Law eJournal (2017). Provided below is an abstract of the Article:

This Article evaluates two sections of Chapter 14 of the Internal Revenue Code—§§ 2703 and 2704(b)—that have been subject to recent taxpayer litigation. These two sections interrelate in (presumably intended) ways, with material consequences for each provision. This twin evaluation provides an opportunity to (i) render fresh judgments about the in-practice success of each section, (ii) resolve material interpretive issues that remain for both provisions, (iii) fully describe and understand the (presumably unintended) interrelation between the two provisions, and (iv) put forward new policy proposals related to these sections—from challenging certain established case law to offering regulatory and legislative changes.

This evaluation begins with § 2703. It reviews the provision’s legislative history and implementation, measuring § 2703’s interpreted meaning against Congress’s stated objectives. I argue that the judicial approach to § 2703 is generally consonant with the internal logic of the statute, as well as Congress’s stated goals. This as-applied view of § 2703 provides the tools necessary to resolve outstanding issues in the statute’s interpretation, specifically: (i) the contested applicability of § 2703(b)(2) across transfer tax contexts and (ii) the right approach to valuation once § 2703(a) is deemed applicable. 

Section 2704(b) is best understood in relation to § 2703. The two provisions provide a compelling study in contrasts. As such, with this review of § 2703 in mind, this Article analyzes § 2704(b)’s history and interpretation to chart its weakness relative to § 2703. Based on this analysis, the Article proposes a regulatory revision to improve the efficacy of § 2704(b) and to harmonize the provision’s regulations with the statutory text. Lastly, this Article uses its dual perspective on these provisions to critique the Treasury Department’s existing legislative reform proposal on § 2704(b) and to provide a more efficient and practical alternative.