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living expenses. In fact, decedent never even asked her sons to
distribute Trust B principal to her when her monthly income was
insufficient to cover her expenses; rather, decedent relied
heavily on the assets she had transferred to RLP and the income
earned therefrom.9
In sum, we conclude that decedent impliedly retained
enjoyment of and the right to income from the assets that she
transferred to RLP. Decedent derived economic benefit from using
RLP’s assets to pay her living expenses, to meet her tax
obligations, and to make gifts to her family members. Such use
of RLP’s assets shows an agreement among decedent and her sons
that decedent would retain the enjoyment of and the right to
income from the transferred assets by withdrawing those assets
and/or income from RLP at will.
3. Bona Fide Sale for Adequate and Full Consideration
Under the exception to section 2036(a) contained in that
section, a decedent’s gross estate does not include the value of
property transferred in “a bona fide sale for an adequate and
9 RLP transactions in 2002 and 2005 also illustrate the
implied agreement among decedent and her sons that the
transferred assets would continue to be used for the liabilities
of decedent, even after her death. In those years, an RLP credit
line was used to pay decedent’s Federal and State tax liabilities
of $2,038,098 and $262,654, respectively. A check also was
written on the RLP credit line for $384,535 to pay some of
decedent’s Federal estate tax.
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Last modified: March 27, 2008