Mar 1, 2005 12:00 PM, Rorie M. Sherman Editor in Chief

By: Rorie M. Sherman Editor in Chief

From David A. Handler of Kirkland & Ellis in Chicago we have this report on the latest development in the Tax Court's understanding of the Internal Revenue Code Section 2036(a): On March 15, the court issued a decision in Estate of Wayne C. Bongard v. Comm'r, 124 T.C. No. 8; No. 6141-03, finding that a decedent hadn't transferred property to his family partnership “in a bona fide sale for an adequate consideration,” and that he'd retained an “implied” beneficial enjoyment of the assets transferred to the family limited partnership (FLP); therefore the FLP's assets had to be included in his estate. This meant $101 million more was included in Wayne Bongard's estate and his heirs owed an additional $52 million in estate taxes.

Bongard gives new meaning to “retaining beneficial enjoyment” under IRC Section 2036(a)(1). Under that section, a gross estate includes the value of all property to the extent of any interest therein of which the decedent has at any time made a transfer under which he has retained until his death “the possession or enjoyment of, or the right to the income from, the property.” In this case, the taxpayer merely had the power to control whether the stock in a FLP was converted into cash by virtue of his position as chief executive officer and sole director of the company whose stock was owned by the FLP. Apparently, his decisionnot to sell the stock was tantamount to retaining possession or enjoyment of the stock.

T&E Premium Content

To read the rest of this article, please login to our Premium Content section:

Registered Web Site Users
User Name:
Password:
Remember Me