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Revenue Ruling 2008-22Revenue Ruling 2008-22
Practitioners generally don't rely solely on the power of substitution to make a trust a grantor trust under IRC 675(4) due to the factual nature of the inquiry as to whether such power is exercisable in a nonfiduciary capacity. In addition, there's concern that a grantor's power to substitute property of a trust may cause the trust property to be includible in a grantor's estate under IRC Sections
January 1, 2009
David A. Handler
Practitioners generally don't rely solely on the power of substitution to make a trust a grantor trust under IRC 675(4) due to the factual nature of the inquiry as to whether such power is exercisable in a nonfiduciary capacity. In addition, there's concern that a grantor's power to substitute property of a trust may cause the trust property to be includible in a grantor's estate under IRC Sections 2036 or 2038. In Revenue Ruling 2008-22, 2008-16 I.R.B. 796 (April 17, 2008), the IRS 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 revenue ruling, the IRS held that the power exercisable by the grantor, in a non-fiduciary capacity, to a...
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