Steve Akers, Senior Fiduciary Counsel, Southwest Region, Bessemer Trust, has made available for download his summary of Estate of Purdue.    The summary is as follows:

Assets in LLC Not Included in Estate Under Section 2036; Gifts of LLC Interests Qualify for Annual Exclusion; Interest on Loan from Beneficiaries to Pay Estate Tax is Deductible.

This Tax Court case addresses three of the issues “on the IRS radar” that frequently arise in estate and gift tax audits.

  • Section 2036. Assets in an LLC were not included in the decedent’s estate under §2036 because the contribution to the LLC satisfied the bona fide sale for full consideration exception to §2036. The court focused on the management of the consolidated family assets as a legitimate and significant nontax reason for the LLC.

  • Annual Exclusion. Gifts of interests in the LLC were present interest gifts that qualified for the annual exclusion because the donees received income from the interests.

  • Deductibility of Interest on Loan to Pay Estate Tax. Interest on loans from some of the estate beneficiaries to the estate to pay estate taxes was deductible as an administration expense for estate tax purposes.Click here for a discussion of the case.

Click here for a full discussion of the case.

Posted by Lewis J. Saret, Co-General Editor, Wealth Strategies Journal.