IRS Issues Guidance for 2010 Gifts to Trusts
Based on what appeared to be a giant "loophole" in the gift tax law applying to gifts made in 2010, taxpayers could arguably make gifts to a wholly-owned grantor trust free from gift tax. Last week at the Heckerling Estate Planning Institute, commentators said this was too good to be true, and opined that the IRS would soon close the loophole. No sooner said than done:
Yesterday the IRS published Notice 2010-19, which applies to taxpayers making gifts in trust during 2010. Under section 2511(c), a transfer of property to a non-wholly-owned grantor trust is a transfer by gift of the entire interest in the property. To determine whether a transfer to a wholly-owned grantor trust constitutes a gift, the gift tax provisions in effect prior to 2010 apply.
