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Bona Fide SaleBona Fide Sale
Under several Internal Revenue Code sections, the property a person transfers will remain in his gross estate if he retains certain rights or powers over it. There is is an exception for transfers made for a bona fide sale for an adequate and full consideration in money or money's worth, in IRC Sections 2035, 2036, 2037 and 2038, among others. But what, exactly, is a bona fide sale? Recent rulings
February 1, 2005
David A. Handler, partner, Kirkland & Ellis LLP, Chicago
Under several Internal Revenue Code sections, the property a person transfers will remain in his gross estate if he retains certain rights or powers over it. There is is an exception for transfers made for a “bona fide sale for an adequate and full consideration in money or money's worth,” in IRC Sections 2035, 2036, 2037 and 2038, among others. But what, exactly, is a bona fide sale? Recent rulings have shed some light. Unfortunately, the federal appeals courts do not agree. It's therefore vital for estate planners to keep up with the latest decisions.
In Technical Advice Memorandum 200432015 (March 10, 2004), H (let's call him Tom) and his wife (let's call her Anna) formed a limite...
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