Court Finds Property Improperly Apportioned in Estate Tax Case

For over 50 years, Bloomberg BNA’s renowned flagship daily news service, Daily Tax Report® has helped leading practitioners and policymakers stay on the cutting edge of taxation and...

The U.S. Court of Appeals for the Second Circuit finds that the U.S. Tax Court erred when it apportioned the entire value of a Manhattan brownstone to a decedent's estate, even though she had transferred 49 percent of the property to her son several years before her death. In addition to living in the home, the decedent and her son split the proceeds from leasing three floors to a commercial tenant. The Tax Court finds in Estate of Stewart v. Commissioner that the decedent continued to receive the $9,000 monthly rent payment from the commercial tenant and enjoyed the economic benefits of the property. It concludes that the pair had an implied agreement that the decedent would retain the economic benefits of the Manhattan property.