Defined Value Gifts Approved by Ninth Circuit

The U.S. 9th Circuit Court of Appeals in Estate of Petter v. CIR, ___ F.3d ___, 2011 WL 3332532 (9th Cir. Aug. 4, 2011), just affirmed the United States Tax Court, holding that a taxpayer is not liable for transfer tax in a defined value gift scenario.  The taxpayer in Petter claimed a charitable deduction for the value of a charity's share of a gift of interests in an LLC, where the gift documents transferred to the donor's children a fixed dollar amount of the interests as finally valued for tax purposes, and gave the balance to charity. The court also held that the taxpayer was entitled to a charitable deduction for the value of the additional assets transferred to charity upon the donees' final determination of the value of the LLC interests.
This affirmance gives planners more assurance that this type of planning opportunity will pass muster with the courts.