Form 709 Gift Tax Reporting of Transfers of Fractional Interests to Trusts

Identifying Fractional Interest Gift Structures, Complying With Valuation Discount and Substantiation Rules

Note: CLE credit is not offered on this program

Recording of a 110-minute CPE webinar with Q&A


Conducted on Tuesday, February 26, 2019

Recorded event now available

or call 1-800-926-7926
Program Materials

This webinar will provide fiduciary tax advisers with a practical guide to the tax compliance for reporting fractional interest ownership and transfers on estate and trust tax returns. The panel will outline how to identify fractional interest transfers in trust documents, make the allocations and valuation adjustments on tax returns, and identify conditions in transfer structures that trigger gift tax imposition.

Description

A commonly used estate planning practice is the gift transfer of "fractional interests" in certain assets, particularly real estate, investments in art and closely held businesses. Planners use the strategy in several different trust scenarios, often leveraging current charitable deductions and using multiple trusts to obtain valuation discounts and provide asset protection.

Determining the proper tax treatment of fractional interests can challenge tax advisers, particularly in substantiating valuation discounts for purposes of gift tax reporting of initial transfers of these divided interests. Compliance professionals advising both individuals and trusts must have a thorough grasp of fractional interest rules to avoid costly tax consequences.

The particular hurdle in reporting fractional interests is determining the valuation of the transfer for gift purposes. Taxpayers may take discounts on the value of split-interest gifts based on lack of marketability or, in the case of minority interests, lack of managerial control. The Code requires taxpayers to provide a qualified appraisal of the interest transferred, and the IRS intensely scrutinizes fractional interest gifts.

Listen as our experienced panel provides a practical guide to tax compliance when reporting fractional interest ownership and transfers on estate and trust tax returns. The panel will focus on fractional interest transfers in trust documents, allocations and valuation adjustments on tax returns, and conditions in transfer structures that trigger gift tax imposition.

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Outline

  1. Gifting fractional interests to trusts
    1. Types of fractional interests
    2. Statutory authority
    3. Identifying fractional interest gifts in trust documents
  2. Types of property commonly divided into fractional transfers
  3. Trusts funded by transfers of fractional interests
  4. Valuation discounts and appraisal requirements
  5. Reporting fractional gifts and discounts on estate and gift tax returns

Benefits

The panel will discuss these and other important questions:

  • Transfer tax valuation opportunities and challenges in passing fractional shares of real estate and other property to a trust
  • Fractional interest scenarios in trust documents
  • Types of fractional interest transfers and ownership structures
  • Fractional interest transfers to spousal trusts, QPRTs

Faculty

Moyer, Kemp
Kemp Moyer

Senior Manager, Advisory
BPM

Mr. Moyer has over 12 years of experience in financial advisory, with a primary focus on valuation services. He has...  |  Read More

Pickering, Sarah
Sarah Pickering

Atty
Holland & Knight

Ms. Pickering practices in the firm's Private Wealth Services Group. She has experience with trust and estate...  |  Read More

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