Tax Notes has published an article by Richard A. Dees, of McDermott Will & Emery, which examines the Strangi decisions and other cases that relate to Section 2036.
According to Tax Notes:
In part one of a two-part article, the author places the recent cases, such as Strangi, including some family limited partnership (FLP) interests in a partner's estate as part of the historic struggle between applying section 2036 to partnership and corporate interests and limiting its application to trust interests. Dees advances the novel argument that Congress resolved this question in 1990 when it enacted chapter 14 as a comprehensive statute addressing valuation issues with specific rules and rejected the estate inclusion approach of section 2036(c). Dees demonstrates that the Strangi cases create the same problems as section 2036(c), the Monster That Ate Estate Planning. As a result, the courts should never have applied section 2036 to partnership or corporate interests, and the author contends that it was a failure in drafting section 2704 in chapter 14 that led to the current section 2036 (Monster) Cases. Although chapter 14 should foreclose the application of section 2036 to partnership and corporate interests, Dees also considers other legal issues the courts have failed to address. Dees concludes by conceding that the unfavorable facts of the Monster Cases have led to those decisions. However, Dees offers an alternative test allowing the courts to reach nearly the same results without applying section 2036 or contradicting chapter 14.
See Richard A. Dees, "Time Traveling to Strangle Strangi (and Kill the Monster Again), Part 1", 116 Tax Notes 563 (Aug. 13, 2007).
Posted by Lewis J. Saret, General Editor, Wealth Strategies Journal.
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