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.
Zern, Martin, "Estate Tax Aggregation Theory: IRS Continues Its Losing Ways" (1999). Faculty Working Papers. Paper 29.