1. NRS 0.039 defines “person” to include “any form of business or social organization” and specifically mentions “a corporation, partnership, association, trust or unincorporated organization”.
  2. NRS 86.401 (as to limited-liability companies) and NRS 88.535 (as to limited partnerships).
  3. “Estate”, “assets”, and “property” are used interchangeably to refer to everything that you own. For federal estate tax purposes, it does not matter whether your estate passes under your will, under a revocable trust, by beneficiary designation, by right of survivorship, or otherwise.
  4. Internal Revenue Code § 2010(c) provides for an “applicable exclusion”, which is the cumulative amount that can pass free of gift and/or estate tax. The applicable exclusion is $5,340,000 for 2014, $5,430,000 for 2015, and $5,450,000 in 2016. For the applicable exclusion in prior years, see Tax-Related Planning.
  5. The maximum rate imposed for federal estate tax purposes is currently 40%. For the rates in prior years, see Tax-Related Planning.
  6. During each calendar year, each taxpayer can exclude certain gifts from the imposition of the gift tax. There is an “annual exclusion” applicable to gifts made to each donee (recipient) during each calendar year. This amount is $14,000 for gifts in 2013 through 2016 and is subject to cost of living increases. Other exclusions that have no dollar limitation include: (1) tuition you pay directly to the educational institution for someone else; (2) medical expenses you pay directly to the health-care institution for someone else; (3) gifts to your spouse; and (4) gifts to a charitable organization for its use. The “applicable exclusion” that is available for taxable transfers during life and at death will not be affected except as to gifts that exceed these exclusions. Gifts that exceed the annual exclusions and the lifetime “applicable exclusion” will trigger a gift tax.
  7. If another business entity already exists, it may be advisable to make gifts of that entity after converting some of the ownership interests into nonvoting interests if nonvoting interests do not already exist.
  8. The values and “discounts” discussed are for illustration purposes only. There is no exact formula for determining a discount for gift and estate tax valuation. As is discussed in 3.4(e), an appraisal prepared by a qualified appraiser is the best evidence of the value of a partnership interest that is being given away.
  9. Federal tax law allows an LLC to elect (on IRS Form 8832) to be taxed as a corporation under Subchapter C or Subchapter S, but, unless such an election is made, a one-member LLC will be disregarded (i.e. treated as a sole proprietorship) for tax purposes, and a multiple-member LLC will be taxed as a partnership.
  10. The partnership agreement can include a provision requiring a minimum distribution to cover tax payments due to the IRS.
  11. Many irrevocable trusts were not intended to be grantor trusts for income tax purposes, but due to a “defect” in the drafting of the trust instrument, the trust was classified by the IRS as a grantor trust. Because of that, some people refer to an irrevocable trust that is a grantor trust as a “defective grantor trust”, and when that “defect” is intentional, the trust is sometimes called and “intentionally defective grantor trust”. This memo does not use the term “defective” because the grantor trust status is intentional.
  12. For future flexibility, the irrevocable grantor trust is designed so that the grantor trust status can be irrevocably cancelled.
  13. For the IRS’ position, see Letter Rulings 9719006, 9723009, 9725002, and 9730004. See also Malkin v. Commissioner, TC Memo 2009-212 (2009).
  14. Helveringv. Hutchings, 312 U.S. 393 (1941) began the indirect gift concept, and Robinettev. Helvering, 318 U.S. 184; 30 AFTR 384 (1943) began the gift-on-formation doctrine. See also Shepherd v. Commissioner, 115 TC 376 and Reg. § 25.2511-1(h)(1).
  15. Strangi v. Commissioner, 115 TC 478; aff’d by 239 F.3d 279 (5th Cir. 2002).
  16. See Hackl v. Commissioner, 118 T.C. 279, 294 (2002), aff’d 335 F.3d 664 (7th Cir. 2003) and Price v. Commissioner, T.C. Memo 2010-2 (January 4, 2010).