Comments

This paper was published as a Faculty Working Paper (no. 185)for the Lubin School of Business, Center for Applied Research, September 1999.

Document Type

Article

Abstract

Sophisticated estate planning encompasses the concept of valuation discounting. Discounting can be accomplished by transferring fractional parts of a property interest, or arranging things so that only a fractional part is owned at death. A minority and/or market discount is claimed for the fractional interest. The IRS has unsuccessfully challenged fractionalization using an "aggregation theory" under which interests of family members in the property are combined into a majority interest, precluding a minority discount. In two 1999 Tax Court cases, the IRS also lost when it attempted to expand its "aggregation theory" to include stock held in a so-called "QTIP" trust. This paper examines these cases and also explores other estate tax issues.



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