Disappearing and Reappearing Value on a Two-way Street: The Reverse Chenoweth Situation

In the Bongard case, the court said that the estate may be able to get a tax deduction for a gift the person who passed away made to their spouse, even though the gift was pulled back into the estate for tax purposes. In the Lauder case, the court allowed a tax deduction for the higher value of stock in the estate that the spouse owned, even though the buy-sell agreement set a lower value for the stock. In both cases, the courts said that the surviving spouse could get a tax deduction for the higher value of the assets they would inherit, even if a different value was set for tax or agreement purposes. It seems that the Tax Court might decide that when certain values reappear in a person’s estate, those values should be divided between the marital and charitable deductions. This makes sense because the assets of a company are connected to the person’s ownership in that company. For example, if someone gives part of a family business to their kids, and then those assets end up back in their estate, the court might not count the value of the gifts to the kids when figuring out the estate tax. This could change in the future, though, if new laws are passed that affect how we calculate the value of assets in family businesses. In simpler terms, the reappearing value issue can be avoided by transferring the entire partnership interest to the first spouse’s marital trust, which can then be distributed to the surviving spouse. This can help minimize any discounts and make the estate planning process smoother. Ultimately, with the right advice and planning, the reverse Chenoweth situation should not be a cause for concern. This article discusses the importance of consistent valuation in estate planning. It mentions a case called Ahmanson and discusses the potential issue of “reverse Chenoweth situations” in estate planning. It also mentions the importance of understanding the value of family limited liability companies. The author is a tax and estate planning lawyer.

Source: https://www.floridabar.org/the-florida-bar-journal/disappearing-and-reappearing-value-on-a-two-way-street-the-reverse-chenoweth-situation/