Updated Wednesday, April 16, 2014 as of 11:52 PM ET
Portfolio - Estate Planning
A Major IRS Estate Tax Loss
by: Bruce Givner
Thursday, February 14, 2013
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There were other interesting technical issues in the case, primarily involving the marital deduction, specifically the qualifying terminable interest property trust. A QTIP trust allows the estate tax marital deduction for a trust that gives the surviving spouse only a life estate. Section 2519, one of the most difficult sections of the Internal Revenue Code to comprehend, triggers a gift tax when any part of a QTIP is assigned. In this case Mrs. Kite was able to reduce the taxable value of the assets in the QTIP trust by investing them in a limited partnership and, as a result, applying a 34.354 percent lack of marketability and minority interest discount. The court recognized that the mere conversion of the property into other property in which she had a qualifying income interest for life is not subject to Section 2519ís gift mechanism.

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