In a new U.S. Tax Court decision, a donor’s estate wasn’t liable for gift tax after the termination of a qualified terminable interest property (QTIP) trust and distribution of its assets. The QTIP owner’s widow funded it with closely held corporation shares. When she later terminated the trust, she received the assets and transferred stock shares to her stepsons. She then sold the assets and gifted the proceeds to her stepsons’ trusts in exchange for interest-bearing promissory notes. The widow reported the gifts on IRS Form 709 and took the position they didn’t result in gift tax. The court agreed. Her actions qualified as a disposition because she relinquished her interest. (162 TC 9)
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