It is crucial that the charity or trustee not be legally bound to surrender the shares for redemption, i.e., that the corporation not have the ability to compel the charity to surrender the shares for redemption. Otherwise, the gift of stock to the charity may be ignored for tax purposes, in which case the transaction will be treated as a redemption by the corporation of the taxpayer's stock, possibly subjecting the taxpayer to taxable gain. Rev. Rul. 60-370, 1960-2 C.B. 203, provides that if the trustee of a charitable trust is under an obligation, either express or implied, to sell or exchange the property transferred to the trust and to reinvest the proceeds in tax-exempt securities, any gain realized on the sale will be taxed to the grantor. The Tax Court sanctioned the charitable stock bail-out in Palmer v. Comr. In Palmer, the taxpayer had voting control of a corporation and also of a tax-exempt private foundation as a result of provisions in the by laws of the foundation allocating voting power to certain certificates, most of which were held by the taxpayer and his wife. The taxpayer donated his stock in the corporation to the private foundation and then caused the corporation to redeem the stock from the foundation. V.
Inclusion to Achieve Basis Advantages A.
Transfer Property to the Dying Spouse
A donor (or the spouse of the donor) of “appreciated property” may reacquire the property from the donee if the donee later dies. If the conditions described below are met, the basis of the reacquired property to the donor (or spouse) is the adjusted basis of the property to the donee-decedent immediately before the death of the donee-decedent. This “adjusted basis rule”—rather than the “stepped-up basis” rules —applies only if: (1) the property was acquired by the donee-decedent by gift and the donee dies within one year of the gift; and (2) the property is acquired from the donee-decedent by—or passes from the donee-decedent to—the donor (or the donor's spouse). If these conditions do not apply the transfer of property to the first of a married couple to pass away can achieve basis step up without by reason of the marital deduction incurring additional federal estate tax. B.
Inclusion Techniques
The Estate Tax has historically included certain “string provisions” which bring back into the gross estate of a transferor, property transferred by lifetime gift but pursuant to which the transferor retained an interest or control over the property until death. In the current environment of a significantly increased Basic Exclusion Amount, these provisions can be used in situations where the client wishes to make a lifetime gift of property, and at the same time realize a step up in basis at death. 1.
Sec. 2036
a.
Overview.
Sec. 2036 requires that property once owned by the decedent and gifted during lifetime be included in the decedent's gross estate if the decedent retained a life interest in the property. b.
The Elements of Sec. 2036.
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