Eighth Circuit Affirms "Charitable Lid"
If your client's estate plan is to provide for beneficiaries and charity while leaving the IRS out then a "charitable lid" may be of use.
In the Estate of Christiansen v. Commr., the U.S. Court of Appeals for the Eighth Circuit affirmed the Tax Court's opinion regarding a "charitable lid" estate tool on November 13th.
The beneficiary was given $6.3 million to provide for the continuance of a family's ranch with the remainder of the estate passing to charity via a charitable lead annuity trust and private foundation. The IRS audited the estate tax return and increased the taxable value of the estate due to an adjustment to various properties reported on the return. Due to the " charitable lid," the beneficiary kept the $6.3 million and the charity gained an increased donation. The IRS walked away with nothing despite their audit adjustment.
The IRS argued the audit was a post-death event and should not count in determining the charitable deduction. They also argued that an increase in value of the property they adjusted should garner an additional tax owed to the IRS "for their trouble." As mentioned, the Tax Court agreed with the taxpayer and the case was later affirmed by the U.S. Court of Appeals.
For more information about this court case, please see the attached analysis by Roger McEowen.
The tax and business valuation professionals at Terry, Lockridge & Dunn, Inc. have more than 30 years experience as it relates to estate planning tax techniques. If you have any questions, please contact us at 319-339-4884.
http://www.calt.iastate.edu/eighthcircuit.html
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