Real Property, Trust and Estate Law Journal. Wntr, 2018, Vol. 52 Issue 3, 369
Government regulation, Charitable contributions -- Taxation, Tax deductions -- Laws, regulations and rules, Income tax -- Laws, regulations and rules, Income tax -- Remedies, Estate tax -- Laws, regulations and rules, Internal Revenue Code (I.R.C. 642(c)), and Internal Revenue Code (I.R.C. 663(c))
I. INTRODUCTION II. GIVING IRD TO CHARITY III. IRD PAID TO AN ESTATE--SEPARATE SHARES? A. The Separate Share Regulations in Operation 1. Decedent's Will Silent as to Allocation of IRD [...] Authors' Synopsis: Taxpayers sometimes die with a right to gross income that has not been received at the time of death and is not reportable on the decedent's final or other pre-death income tax return, that is, with an entitlement to items of 'income in respect of a decedent' (IRD). An estate with charitable beneficiaries that receives IRD will want a section 642(c) income tax charitable deduction for amounts of gross income distributed or distributable to or set aside for a charitable purpose to offset the gross income realized when the IRD is collected and reportable in gross income. This is possible when the IRD is distributable to or set aside for the charity pursuant to the terms of the governing instrument. This Article analyzes the potential application of the separate share regulations under section 663(c) and the income tax charitable deduction under section 642(c) when the estate has both charitable and non-charitable residuary beneficiaries. This Article concludes that a charity's interest in the residue of an estate is not a separate share within the meaning of the separate share regulations. Next, this Article considers whether a direction in the decedent's will to distribute items of IRD to charity as a part of the charity's interest in the decedent's residuary estate satisfies the 'economic effect' requirement found in the Treasury Regulations for section 642(c). This Article suggests that it does, but that the conclusion is not certain. Finally, the Article suggests possible solutions to assure that the income tax charitable deduction is available for an estate when it pays over the proceeds from items of IRD to a charity.
contracts law, estate, gift trust law, real property law, and tax law
I. A taxpayer making a gift of property may incur a federal gift tax, depending on who is the donee 1 and the form and value of the gift. 2 A necessary part of calculating gift tax liability is determining the value of the gift. 3 For outright gifts of cash or marketable securities, valuation is relatively straightforward. 4 Other types of property present more difficult questions: extensive litigation has arisen over the value of real estate and closely held corporate stock. 5 A different dimension to valuation arises when a donor gives away a future interest in property while retaining a present interest, or retains a future interest while giving away the present interest in the property. The unique valuation issues are equally a problem for a donor who retains no interest in property but gives a present interest to one donee and a future interest to another. 6 Gifts in this form are commonly referred to as split-interest gifts. 7 To value a gift of a split interest in property, the Treasury Department has issued regulations providing actuarial tables that are used to calculate the value of the gift once the value of the property itself is determined. 8 This valuation is based on the present value of the right to receive the income from the gift for a stated term. Nevertheless, valuations of gifts determined by applying these tables are in many instances inaccurate. The inexact nature of split-interest valuation results from ...