Thursday, May 03, 2012

Estate of Morgens v. CIR (9th Cir. - May 3, 2012)

"This case presents the question whether gift taxes paid by the donee trustees of a Qualifying Terminable Interest in Property (QTIP) trust, based on a 26 U.S.C. § 2519 deemed inter vivos transfer of the QTIP property within three years of the donor’s death, must be included in the transferor’s gross estate under the so-called “gross-up rule” of § 2035(b)."

Duh!  Who doesn't know the answer to that question?!

Hello?!  It's a QTIP.  (No, not the ones that go in your ear.)  It's 2519 and 2035(b).  The gross-up rules, silly!  It's so simple, maybe you need a refresher course.

The answer, of course, is yes.  Obviously.

Who has these problems?  Just your ordinary 26-year old.  To be more precise, your ordinary 26-year old who marries the former president and CEO of Proctor & Gamble from 1957 to 1974, once he dies of a heart attack at age 89.

And I know what you're thinking.  "Gold-digger!"  Because Judge Bea's opinion mentions that Anne Morgens married Howard when she was 26, but doesn't mention the date they were married.

Which is relatively easy to find out.  The two were married for . . . 65 years.

Plus, it's not really the former 26-year old's problem anyway.  She died two years after he died.  Which which what caused these tax "planning" (read: avoidance) issues in the first place.

The Ninth Circuit gets this one right.  You can't do some tricks on your death bed in order to decrease your estate tax.  Sorry about that.  But Congress knows the scoop.  So do judges.  And now, so do we.  Even if the words QTIP and gross-up continue to mean something different to tax practitioners than they do to normal people.