Estate of Eleanor R. Gerson, Deceased, Allan D. Kleinman, Executor - Page 6

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          return reported a gross estate in the amount of $22,054,002.79,             
          and Federal estate tax in the amount of $7,168,531.02.                      
               As indicated, respondent issued a statutory notice of                  
          deficiency to decedent’s estate.  A timely petition for                     
          redetermination was filed with the Court challenging respondent’s           
          determination.                                                              
                                     Discussion                                       
               The parties do not dispute that a transfer from decedent               
          directly to her grandchildren, skipping over decedent’s children,           
          normally would be subject to GST.  As discussed in detail below,            
          the dispute in this case centers on the transitional relief                 
          provided by the “grandfather” exception to the GST tax set forth            
          in TRA 1986 section 1433(b)(2)(A), and the validity of section              
          26.2601-1(b)(1)(i), GST Tax Regs.  The regulation provides that a           
          transfer of property pursuant to the exercise, release, or lapse            
          of a general power of appointment that is treated as a taxable              
          transfer under Federal estate and/or gift tax provisions, is not            
          a “transfer under a trust” that is eligible for transitional                
          relief from GST tax under TRA 1986 section 1433(b)(2)(A).                   
               To frame the issue properly, we briefly outline the GST tax            
          provisions, review pertinent caselaw that preceded the                      
          promulgation of section 26.2601-1(b)(1)(i), GST Tax Regs.,                  
          examine the regulation and the circumstances surrounding its                
          promulgation, and summarize the parties’ positions.                         






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