In Uncategorized on 06/18/2018 at 22:53

Is it always wise to counter an adversary’s summary J motion with a cross-motion for summary J ? Maybe not, but I wish I had more insight into IRS’ decision to resist but not cross-move in Estate of Richard F. Cahill, Deceased, Patrick Cahill, Executor, 2018 T. C. Memo. 84, filed 6/18/18.

Pat Ex’r wants summary J that Reg. Section 1.61-22 economic benefit regime wipes out Sections 2036, 2018 and 2703. IRS says no it doesn’t, but there are material questions of fact.

Like what? “In his response to the estate’s motion, respondent argues that there are genuine issues of material fact. In its reply to respondent’s response, however, the estate argues that ‘the facts regarding the split-dollar transactions and the documents underlying the transactions remain undisputed.’ In its reply the estate concedes that it has no objection to respondent’s proposed findings of fact as attached to respondent’s response. And the heading of one section of the estate’s reply is ‘Respondent’s Summary of Facts Does Not Conflict with Petitioner’s’. Because the estate agrees with respondent’s characterization of the facts, we accept respondent’s summary of facts and proposed findings of fact as undisputed for the purposes of deciding the estate’s motion for partial summary judgment.” 2018 T. C. Memo. 84, at pp. 2-3 footnote 2.

It’s a split-dollar life insurance deal. The late Richard, 90 years old and incompetent, borrows $10 million via a self-settled trust (of which Pat Ex’r is trustee, and also the late Richard’s attorney-in-fact immediately prior to the time the late Richard became the late Richard), to buy life insurance on Pat Ex’r (individually), cousin William (trustee of another of the late Richard’s last-minute trusts) and Mrs Pat Ex’r. The late Richard’s trust and Pat are personally liable for the loan, but the policies are pledged.

The late Richard promptly becomes the late Richard.

It’s the usual stash of the cash surrenders of the policies. You can read all of ex-Ch J Michael B (“Iron Mike”) Thornton’s narrative, but in the end, the estate of the late Richard claims it has only $183K, where the cash surrender values aggregate $9.6 million and were stowed in the other last-minute trust.

Economic benefit applies only to gift tax, not estate tax. And the future possibility that Ex’r Pat, Mrs Ex’r Pat and cousin William might give gifts to their progeny to buy out the family business is a matter for the beneficiaries, not the estate. All they got was the cost of current life insurance premiums; the estate of the late Richard kept the rest.

But whatever the law, ex-Ch J Iron Mike won’t buy that this was an exchange of equivalent values. The late Richard’s trust, and thereby his estate, got $183K; Ex’r Pat, Mrs Ex’r Pat and cousin William got $9.6 million.

Anyway, ex-Ch J Iron Mike lets it all ride. “Respondent has not moved for summary judgment in his favor on any of the issues discussed. As there may be other facts or theories not yet presented, we decline to treat respondent’s response to the estate’s motion as a cross-motion for partial summary judgment.” 2018 T. C. Memo. 84, at p. 35.

I’m perplexed. Motion to revise?


  1. A & A BBQ – 2018


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