Estate of Rose D' Ambrosio, Deceased, Vita D'Ambrosio, Executrix - Page 12

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          the executors, no part of the trust corpus was includable in the            
          decedent's gross estate because the sale of the income interest             
          was for adequate and full consideration.  After the District                
          Court agreed with the executors' position, the Court of Appeals             
          for the Tenth Circuit reversed.  According to the Court of                  
                    Our narrow question is thus whether the corpus of                 
               a reserved life estate is removed, for federal estate                  
               tax purposes, from a decedent's gross estate by a                      
               transfer at the value of such reserved life estate.  In                
               other words, must the consideration be paid for the                    
               interest transferred, or for the interest which would                  
               otherwise be included in the gross estate?  [Id. at                    
          In holding that the consideration must be paid for the interest             
          that would otherwise be includable in the gross estate, the Court           
          of Appeals first acknowledged the well-settled principle that a             
          taxpayer may reduce his or her tax liability through any                    
          permissible means.  The Court of Appeals then found, however,               
          that the decedent's transaction was not a permissible means under           
          this principle.  The court stated:                                          
                    It does not seem plausible, however, that Congress                
               intended to allow such an easy avoidance of the taxable                
               incidence befalling reserved life estates.  This result                
               would allow a taxpayer to reap the benefits of property                
               for his lifetime and, in contemplation of death, sell                  
               only the interest entitling him to the income, thereby                 
               removing all of the property which he has enjoyed from                 
               his gross estate.  Giving the statute a reasonable                     
               interpretation, we cannot believe this to be its                       
               intendment.  It seems certain that in a situation like                 
               this, Congress meant the estate to include the corpus                  
               of the trust or, in its stead, an amount equal in                      
               value.  [Id. at 918; citations omitted.]                               

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