A Major Win for Gift Tax Valuation

A recent tax court decision, Wandry v. Commissioner, T.C. Memo 2012-88, found that a gift can be made indicating an amount of assets rather than what the assets are.  The taxpayers made a gift to their children and grandchildren in an LLC based on a specific dollar amount rather than a percentage of the LLC.  Although this may not sound like much of a difference, there is an important distinction between the two.  Simplistically, what it accomplished is that if the IRS was able to challenge and change the valuation of the percentage of the LLC gifted, the percentage would change and the taxpayer would not incur any additional gift tax exposure.  This means that regardless of the eventual findings, the IRS could not collect additional taxes.

Even though it is likely that the IRS will appeal this decision to a higher court, we will still continue to follow this issue.

We believe that 2012 presents a very important opportunity for gifting and gift tax planning. The current level of gifting and generation skipping tax exemptions are the highest they have ever been and we have no idea what will happen in the future. This is why we believe it is so important to share the numerous updates on this subject and offer gift and estate tax planning as one of the focuses of our year-end tax seminars.  If you have questions about this recent tax court case or other gift tax issues, please contact our tax department (781) 407-0300.

View the full Wandry v Commissioner, T.C. Memo 2012-88

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