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Gift Valuation and Tax Liability
Decedent made several gifts of stock to his children and grandchildren just before his death. The children agreed to pay for any unforeseen gift tax that might arise if the value of the stock were found to be higher than what was reported on gift tax returns. As anticipated, the IRS valued the stock higher and assessed a gift tax deficiency. Decedent's estate then sought a refund. Although Decedent's children assumed the potential gift tax liability, the Court ruled that the amount of liability thus assumed was speculative at the time of the transfer and could not be used in adjusting the value of the gift. The fact that the children did not actually pay the
additional tax was an indication that no liability was, in fact, assumed. The same reasoning applied to the potential transferee liability of the children as donees under §6324(a)(2) based on the inclusion of gift tax paid within three years of death in
the gross estate under §2035(b). A gift has to be valued at the time of the transfer.
Source: Armstrong, Jr. Trust, DC Va., 2001-1
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Sponsored by James J. Eccleston, an attorney representing stockbrokers, financial planners and
investors nationwide in arbitration, litigation and regulatory matters, and a shareholder with the law firm
Shaheen, Novoselsky, Staat, Filipowski & Eccleston
P.C.(www.snsfe-law.com). This Web site contains material
of general interest. It is neither intended to, nor constitutes, either legal advice or investment advice.
Always consult an attorney and/or investment advisor when building and protecting your wealth.
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