Steinberg v. Comr., 141 T.C. No. 8 (2013)

Date of decision:

(petitioner gifted cash and marketable securities to her three daughters on the condition (pursuant to written net gift agreement) that the daughters pay any related gift tax and pay any related estate tax on gifted property if petitioner died within three years of gifts; petitioner deducted value of daughters' agreement to be liable for gift or estate tax from value of gifts and IRS claimed gift tax understated by almost $2 million; each daughter and petitioner represented by separate counsel and appraisal undertaken who used mortality tables to compute petitioner's life expectancy which impacted values as reported on Form 709; IRS primary argument was that daughters' assumption of potential estate tax liability under I.R.C. Sec. 2035(b) did not increase petitioner's estate and, as such, did not amount to consideration in money or money's worth as defined by I.R.C. Sec. 2512(b) in exchange for gifted property; court determined that primary question was whether petitioner received any determinable amount in money or money's worth when daughters agreed to pay tax liability; court held the petitioner did receive determinable value as to the gift tax; likewise, assumption of potential estate tax liability may have sufficient value to reduce petitioner's gift tax liability; immaterial that intrafamily deal at issue because all persons represented by separate counsel; issue of fact remains for trial on assumption of estate tax issue). 

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