Contingencies and the Gift Tax
Posted: 7 Nov 2001
With the gift tax serving only as a backstop for the income tax in the event of estate tax repeal, Congress needs to reexamine current distinctions between complete and incomplete gifts. Otherwise, in 2010, lifetime transfers will be taxed more severely than testamentary ones even where they are virtually indistinguishable in terms of retained control. The best solution is, of course, to eliminate estate tax repeal; however, if estate tax repeal does in fact occur, all attempted gifts should be treated as completed gifts of the full value of the underlying property. By serving as a prepayment of income tax in this way, the gift tax would more effectively serve its sole remaining purpose. It would also eliminate the need for both the grantor trust rules (excepting perhaps section 676) and the newly enacted section 2511(c).
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