Fourteen tips and traps in dealing with Chapter 14

Article Abstract:

Chapter 14 of the Internal Revenue Code presents both opportunities and problems to the taxpayer. The use of a grantor retained annuity trust to avoid the 'rent-free' clause of section 2702 allows for the use of qualified personal residence trusts and avoids many of the restrictions that give people problems with Chapter 14. Buy-sell agreements can be structured to circumvent section 2703 through the use of outside input such as appraisals. Preferred stock freezes, voting and liquidation rights are also discussed.

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New concerns about the administration of a GRAT or QPRT

Article Abstract:

Two 1996 technical advice memorandums suggest that the IRS is becoming more particular about the administration of GRATs and QPRTs. In one memo, the IRS ruled that a GRAT made up exclusively of non-dividend bearing securities could not be a GRAT because it provided no annuity payments. In another memo, the IRS held that selling a residence included in a QPRT voided the trust.

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The quest for the zeroed-out GRAT: Walton says it can be done

Article Abstract:

The author discusses the US Tax Court's decision in Walton, which invalided example 5 of tax regulations regarding grantor retained annuity trusts and allows for the passage of property to descendants free of transfer taxes.

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