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By Erin McManus
Sept. 29 — Childless bachelor Edward Beyer, while successful in his business career, was less so in his estate planning, leaving his estate owing $24 million in estate and gift taxes ( Estate of Beyer v. Commissioner , T.C., No. 10231-11, T.C. Memo. 2016-183, 9/29/16 ).
Beyer's estate was liable for estate tax on 800,000 shares in Abbott Laboratories and a large portfolio of shares in several other major corporations, because his transfer of the shares to a limited partnership wasn't a bona fide sale, and he retained control over the shares, the U.S. Tax Court ruled Sept. 29.
Beyer worked for Abbott Laboratories most of his life and eventually attained the position of chief financial officer. Beyer's estate didn't qualify for an exception to the bona fide sale requirement, because it couldn't show that he had a legitimate and significant nontax purpose for forming a limited partnership and transferring the stock from a trust to the limited partnership, Judge Carolyn P. Chiechi said.
Chiechi said Beyer could have amended the trust agreement at any time to require that the Abbott stock be maintained in a block and to transition his nephew into managing the assets—the reasons the estate gave for the transfer of assets to the limited partnership.
Beyer also transferred certain assets to the limited partnership with the “implied agreement or understanding that he retain the possession or the enjoyment of, or the right to the income from, assets that he transferred to the limited partnership within the meaning of” tax code Section 2036(a)(1), Chiechi said.
Chiechi affirmed the Internal Revenue Service's disallowance of a stipulated net asset value on an alternate valuation date, because the governing agreement didn't prohibit the sale of the shares.
The estate was liable for gift tax on 18 separate $55,000 contributions to Section 529 accounts for the benefit of various relatives, because Beyer didn't file Forms 709, United States Gift (and Generation-Skipping Transfer) Tax Return, electing to treat the contributions as made over a five-year period.
John W. Porter, Keri D. Brown and Jeffrey D. Watters Jr. represented the estate. Naseem J. Khan, David A. Lee and James Cascino represented the commissioner.
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Text of the decision is in TaxCore.
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