Nelson v. Commissioner: Inadequate Drafting Blows The “Lid” Off Transfer TaxesNelson v. Commissioner: Inadequate Drafting Blows The “Lid” Off Transfer Taxes
Christopher P. Woehrle discusses the charitable lid technique and why it’s an effective tool for the estate and charitable gift planner.
In James C. Nelson v. Commissioner,1 a donor transferred limited partnership (LP) interests equal to percentage interests that were calculated by an appraiser following a gift and a sale to a trust. The LP’s primary asset was common stock of a family-owned holding company. The holding company owned 100% of seven operating subsidiaries.
The donor made two transfers of LP interests to the trust created for her children and husband. The first transfer was a gift that was described in a memorandum of gift as having a fair market value (FMV) of $2 million as of the date of the gift, as determined by an appraiser within 90 days of the effective date of the assignment. The second transfer was structured as a sale and was memorialized by a memora...
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