This article traces the evolving judicial interpretation of the “adequate and full consideration” exclusion found in section 2036. Part III examines the proper application of the “adequate and full consideration” exclusion to simple sales of remainders such as those involved in D'Ambrosio and Wheeler and concludes that the holdings in those cases are indisputably correct. It then analyzes the possible planning opportunities these decisions offer, particularly in light of section 2702. Part IV examines the effect of the D'Ambrosio trilogy on spousal elections. This Part outlines the potential gift and estate tax savings this device affords and then considers how such elections should be analyzed for purposes of the “adequate and full consideration” exclusion. It concludes that spousal elections in virtually every case should be governed by the reciprocal trust doctrine. Under this approach, spousal elections do not constitute sales of remainders, and hence the holdings of the D'Ambrosio trilogy should not apply. Indeed, in many cases, the existing position of the Internal Revenue Service and the courts produces excessively generous results to taxpayers. However, in the relatively few cases where the reciprocal trust doctrine should not apply, the current treatment of spousal elections should change to conform to the holdings in D'Ambrosio, Wheeler, and Magnin.
Ronald H. Jensen, Estate and Gift Tax Effects of Selling A Remainder: Have D'Ambrosio, Wheeler and Magnin Changed the Rules?, 4 Fla. Tax Rev. 537 (1999), http://digitalcommons.pace.edu/lawfaculty/509/.