Attorney-at-Law

HEIR SPLITTING – PART DEUX

In Uncategorized on 05/13/2021 at 18:25

For whatever reason, IRS didn’t cross-move for summary J in Cahill; see my blogpost “Summary J – Tactics,” 6/18/18. Turns out IRS may have been wise, because there are lots of facts when split-dollar life insurance arrangements meet estate tax. And Judge Goeke digs through all of them, as we come to evaluating the tax and chops (40% style) in Estate of Clara M. Morrissette, Deceased, Kenneth Morrissette, Donald J. Morrissette, and John D. Morrissette, Personal Representatives, 2021 T. C. Memo. 60, filed 5/13/21.

I gave a tip of the battered Stetson to the late Clara’s trusty attorneys in my blogpost “Heir Splitting,” 4/13/16, which see for part of the backstory. Judge Goeke has more backstory, and it’s a family feud of the clessic (no misprint, that) species. Dad starts business with one used truck and builds a moving and storage empire covering 32 States, slave-drives his sons, two leave, one stays and gets a Prodigal Son complex when the two come back, the brothers hate each other, sue each other, the next generation wants to get into and keep the business but get shut out by the battling brothers, and Mommy wants the business to stay in the family.

Enter the split-dollar, whereby Mommy’s trust funds the life insurance policies that wind up with the sons’ dynasty trusts.

And Judge Goeke buys it all.

The desire to keep the business in the family, the need for liquidity for estate tax purposes (Mommy owned 75% of the stock, plus real estate and securities), the need to secure peace among the battling brothers, and provide the means for the next generation to buy into the business, get the split past Sections 2036, 2038, and 2703.

It takes 125 pages, but the Estate is leading at the sixteenth pole, when IRS’ valuation of the Estate’s share of the split comes up on the outside on Boss Hoss, and beats the Estate at the wire.

The Estate got $7.5 million, say the PersReps. IRS says $27 million. One of the Estate’s experts is off the mark, but the other and IRS’ expert agree on methodology. On the numbers, IRS wins, and the e-mail exchanges between the RA and his immediate supervisor satisfy Section 6751(b).

Trusty attorney warned the brothers that their valuation was too sweet, but they eschewed getting a legal opinion. No good faith defense to the chop, when they finish the Rule 155 beancount.

Is the SDLIA really dead? Maybe not.

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: