Tax Notes Quotes Beth Kaufman on Proposed IRS Rule Concerning Retained Interests

Tax Notes

A warning included in the estate tax anti-clawback regs about possible restrictions on retained interests and similar arrangements makes the final rules appear decidedly less taxpayer-friendly.

. . .

Other practitioners see more reason for alarm.

“If there is an antiabuse rule in the future . . . the IRS may be able to sustain the position that the rule applies to decedents dying after the rule is proposed or finalized because it impacts the treatment of adjusted taxable gifts only at death,” said Beth Shapiro Kaufman of Caplin & Drysdale.

. . .

Kaufman said that could be a problem for moderately wealthy taxpayers who can’t afford to part with enough assets to use up their bonus exclusion with no strings attached. “A person in that situation could conclude that the potential benefits of one of these [retained interest] transactions outweigh the risks,” she said.

. . .

Kaufman likewise suggested that if the IRS issues proposed antiabuse rules and takes the aggressive approach, practitioners would likely argue that “it is the IRS’s own rules that lead to this result, and therefore engaging in a transfer that takes advantage of the rules is not an abuse at all.”

For the full article, please visit Tax Notes’ website (subscription required).


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