The IRS stated in Action on Decision (AOD) 1996-10, however, that it will challenge
annual exclusions for gifts to trusts with Crummey powers where the substance of the withdrawal rights do not conform with their form.
In fact, an annual per-donor exclusion of $25,000 is more generous than the
annual exclusions of any of the countries surveyed.
The IRS challenged two annual transfers of $70,000 intended to take advantage of seven separate annual gift tax exclusions, but only as to the five
annual exclusions claimed with respect to the minor grandchildren.
Based upon the transfer in trust the grantor claimed multiple
annual exclusions.
Assuming the client obtains a qualified appraisal substantiating discounts of about 35% for lack of marketability and 6% for the minority interest, if the gifts had been made before the recent market decline, the total gift taxes would have been $98,284, after using the clients' full
annual exclusions ($20,000 per child) and their full lifetime gift tax exemptions ($675,000 for each spouse).
Client utilizes only gift tax
annual exclusions each year ($13,000 per donee and $26,000 per donee for spousal "split-gifts") to transfer cash to the trust.
Thus, the transfers in question were not considered present interest gifts, and the taxpayers were not entitled to gift tax
annual exclusions.
The sample design for the study is a stratified probability sample with two stratifying variables: taxability status and size of total gifts (prior to the subtraction of
annual exclusions and deductions in the calculation of total taxable gifts).
000 to a beneficiary's account (subject to individual state limits) and have it sheltered by five years' worth of
annual exclusions.
The Hackl case examined how the partnership's operating agreement and actual operations affect the gift of partnership interests and, more importantly, the availability of
annual exclusions.
The sample design for the study is a random sample stratified by two variables: taxability status and size of total gifts (prior to the subtraction of
annual exclusions and deductions in the calculation of total taxable gifts).
As such, they are eligible for gift tax
annual exclusions, the estate and gift tax lifetime exclusion and, if appropriate, the unlimited marital deduction.
