Time Traveling to Strangle Strangi (and Kill the Monster Again), Part 2
8 Pages Posted: 27 May 2009 Last revised: 2 Aug 2009
Date Written: August 20, 2007
In Part 2 of this article, the author argues that the solution to the problems of the Strangi cases detailed in Part 1 (see Tax Notes, Aug. 13, 2007, p. 563) is repeal of section 2036 and the other estate tax sections that include in the estate gifts made with retained 'strings'. The author proposes that repeal of these estate tax provisions will end for all time the problematic application of section 2036 to partnership and corporate interests. The author proposes coupling repeal with a change treating most irrevocable transfers with 'strings' attached as complete for gift tax purposes. The author believes that the opportunity to establish flexible succession plans without running afoul of section 2036 will encourage business owners, particularly small business owners, to make gifts implementing those plans. Thus the author's change is likely to produce gift tax revenue to help offset other reductions in the estate tax. The author also considers some of the technical issues in implementing his proposed tax changes.
Keywords: estate tax reform, 2036, closely-held businesses
JEL Classification: H24
Suggested Citation: Suggested Citation