Back last September, when discussing the guided largesse of Bruce MacDougall’s kids Peter and Linda, I said that working out what was worth how much, as between remainder interests and promissory notes, is for another day. See my blogpost “No Commuter Tax,” 9/17/24.

Well, Judge James S. (“Big Jim”) Halpern brings us closer to the answer in Linda M. Lewis, Donor, et al., Docket No. 2459-22, filed 4/25/25.

The latest argy-bargy concerns whether relinquishing the remainder interests Peter and Linda had in Mama Clotilde’s testamentary trust was a gift to Papa Bruce of the assets themselves, or of the right to receive distributions therefrom.

IRS says each donor transferred his or her right to receive outright and free of trust a one-half share of the Residuary Trust assets allocable to the remainder interest, as opposed to a one-half share of the remainder interest itself. Order, at p. 1. Apparently IRS thought (or thinks) the assets themselves are worth more than the right to receive distributions thereof.

Judge Big Jim isn’t so sure. “…if Linda and Peter had not agreed, in a Nonjudicial Agreement entered into with Bruce…, that ‘the entire remaining balance of the Trust shall be  distributed outright and free of trust to Bruce,’ the distribution of trust assets among the beneficiaries would have been governed by section 12.8 of Clotilde’s will. That provision allowed the trustee to make either pro rata or non-pro rata distributions ‘so long as the distributees receive assets of a value equal to the value of their respective interest[s] in the trust at the time of distribution.’

“Therefore, if Linda and Peter had not acquiesced in the distribution all trust assets to Bruce, each would have received a share of trust assets with a value equal to the value of his or her remainder interest in the trust. Linda’s and Peter’s gifts would apparently have the same value whether we viewed the transferred property as rights to distributions or as remainder interests. Either way, the value of the gifts would equal the value of the remainder interests when the trust was terminated.” Order, at pp. 1-2. (Footnote omitted.)

Howbeit, neither side has explained what difference it makes in the value of what Peter and Linda gave Papa Bruce. All the above-cited case last September decided was that there was a taxable gift.  Peter and Linda argue there were various contingencies that would have affected the value of what they got if they hadn’t terminated the trust.

Except they did. So the contingencies don’t affect the worth of what they gave away.

So for the moment, all Judge Big Jim decides is that the worth of what Peter and Linda gave away was the right to receive distributions of what was in the trust at termination thereof.  And the value of Linda’s and Peter’s remainder interests in the Residuary Trust when the trust was terminated definitely has bearing of the value of the gifts they made to their father. Order, at p. 5.

Clear? Thought not.