- 7 -
cost; and (2) to extract corporate assets without incurring a
dividend or capital gains tax. The addendum stated that the
second described objective was the primary one. Indeed, Mr. Page
recognized early on that the overall purpose of the joint
purchase was transferring wealth to the remaindermen. As he
wrote in the May 15, 1986, letter:
The purchaser of the term interest or the life estate
has a lousy deal, which is really the purpose of the
transaction * * *. The objective is really the same as
in a private annuity, i.e., doing in the annuitants for
the benefit of the obligor, in this case it is doing in
the life tenant for the benefit of the remainderman.
Mr. Page regarded the joint purchase by a closely held corpora-
tion and its shareholders of, respectively, a life or income
interest and a remainder interest in property to be a favorable
device for meeting that objective.
Mr. Page, however, was aware of potential problems which
might frustrate a joint purchase, the most important for our
purposes being his statement about how a shareholder would fund
the remainder interest purchase. Mr. Page warned that "Simul-
taneous gifts of funds for the acquisition of the [remainder]
interest contain an element of risk in collapsing the transaction
into one of being a 'retained' interest rather than a 'purchased'
interest, in which case the favorable * * * tax results do not
occur."6 Mr. Page then offered his solution: "Gifts separated
6Mr. Page was aware that, when a taxpayer attempts to carve
out a term interest in existing property for himself and transfer
the remainder interest to a third party, "the holder of the life
tenancy or the term interest," as he writes, "would not be able
(continued...)
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