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Tax Law Update 2008-06-01 (1)Tax Law Update 2008-06-01 (1)
Grantor's power to substitute property may not require inclusion of the property in the grantor's gross estate. There has long been concern that a grantor's power to substitute property of a trust, which may be used to render the trust a grantor trust under Internal Revenue Code Section 675, may cause the trust property to be includible in the grantor's estate under IRC Sections 2036 or 2038. In Revenue
David A. Handler, partner, & Alison E. Lothes, associate, in the Chicago office of Kirkland & Ell
Grantor's power to substitute property may not require inclusion of the property in the grantor's gross estate. There has long been concern that a grantor's power to substitute property of a trust, which may be used to render the trust a grantor trust under Internal Revenue Code Section 675, may cause the trust property to be includible in the grantor's estate under IRC Sections 2036 or 2038. In Revenue Ruling 2008-22, 2008-16 IRB 796 (April, 17, 2008), the Internal Revenue Service resolved the issue by holding that if certain constraints are in place, the power will not cause inclusion in the grantor's estate.
In the ruling, the IRS held that...
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