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Dec 1, 2011 12:00 PM
Step-Transaction Doctrine Compliance
The reformulated analysis adopted in three recent court rulings is good news for taxpayers, but they should still act soon to make gifts of interests in family business entities
With the lifetime gift tax exemption at $5 million and the gift tax rate at 35 percent, now's a perfect time for taxpayers to take advantage of wealth transfer opportunities. But these opportunities aren't endless. Absent intervening legislation, the lifetime gift tax exemption will return to $1 million and the highest marginal gift tax rate will increase to 55 percent on Jan. 1, 2013.
While this may seem like plenty of time, it isn't, especially for those taxpayers who plan to make gifts of interests in recently funded family business entities (FBE), such as family limited partnerships (FLPs) or limited liability companies (LLCs). These taxpayers must leave time to avoid running afoul of the step-transaction doctrine. This doctrine refers to the Internal Revenue Service's argument that the funding of an FBE and subsequent gifts of discounted interests in the FBE, should be “stepped together” and re-characterized as gifts of the FBE's underlying, non-discountable assets.
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Topics of Interest
| Estate Tax | Donor Advised Funds |
| GSTs | Family Offices |
| Private Foundations | Life Insurance |
| 2010 Tax Act News | Industry Trends Surveys |
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