IRS rules on predeceased parent exception for GST purposes

Article Abstract:

The IRS has ruled that the predeceased parent exception to the generation-skipping transfer tax in IRC 2612(c)(2) only applies when the transfer would be a direct skip, and thus a reverse QTIP election under IRC 2652(a)(3) negates the applicability of this exception. This is the case because for a transfer to be a direct skip, it must be liable for an estate or gift tax on the transferor when the transfer is made. The QTIP election made the spouse liable for estate or gift tax, but according to the reverse QTIP election the grandparent was the transferor.

Trusts and trustees, Trustees, Trusts (Law)

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Administration expenses payable from income do not reduce marital and charitable deductions

Article Abstract:

The US Court of Appeals for the 11th Circuit affirmed the Tax Court in Estate of Hubert and found that an estate's marital and charitable deductions need not be reduced by the amount of administrative expenses paid out of the estate's income. Georgia state law allowed the expenses to be paid out of income if so stated in the will. The IRS had argued that the deductions should be reduced by the amount of the expenses, consistent with rulings in the Federal Circuit and the Sixth Circuit.

United States, Decedents' estates, Charitable contributions, Charitable donations

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QTIP denied where spouse could appoint corpus for child

Article Abstract:

The Tax Court read the language of IRC 2056(b)(7)(B) very literally in Estate of Manscill, denying QTIP status and the marital deduction when a trustee had the authority to appoint principal to anyone other than the surviving spouse, even if the surviving spouse's approval was required. The court stated that deductions are a result of legislative grace, making it essential that all conditions imposed by Congress be met.

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