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Passing Estate Tax Values Through the Eye of the Needle

10 Pages Posted: 8 Sep 2011  

Calvin H. Johnson

University of Texas at Austin - School of Law

Joseph M. Dodge

Florida State University - College of Law

Date Written: August 29, 2011

Abstract

The taxable estate is the value of assets at the moment of death or other valuation date. Routine estate planning claims discounts of 30 to 60 percent of the value of the property through temporary, self-imposed restrictions or arrangements that will lapse or that heirs can undo. The wealth transferred to heirs is better measured by ignoring the self-imposed temporary restrictions that reduce value. We should be skeptical that self-imposed restrictions permanently affect the wealth transferred to heirs; if they do, the law should not encourage it. Section 2704(b) has proved inadequate to prevent this technique. Under this proposal, value-reducing restrictions or arrangements added by the decedent or on his behalf would be ignored in transfer tax valuation. The lapse of a restriction that originally reduced transfer tax value by a material amount would be a taxable transfer subject to supplemental transfer tax that would be a proxy estate tax.

Suggested Citation

Johnson, Calvin H. and Dodge, Joseph M., Passing Estate Tax Values Through the Eye of the Needle (August 29, 2011). Tax Notes, Vol. 132, p. 939, August 2011; U of Texas Law, Law and Econ Research Paper No. 214; The Shelf Project. Available at SSRN: https://ssrn.com/abstract=1924339

Calvin Harsha Johnson (Contact Author)

University of Texas at Austin - School of Law ( email )

727 East Dean Keeton Street
Austin, TX 78705
United States
512-232-1306 (Phone)
512-232-2399 (Fax)

Joseph M. Dodge

Florida State University - College of Law ( email )

425 W. Jefferson Street
Tallahassee, FL 32306
United States
850-644-4590 (Phone)

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