Tuesday, May 2, 2023
IRS Rules Against A Tax Tactic For Irrevocable Grantor Trusts
The IRS recently ruled that a long-used basis adjustment under Section 1014 generally does not apply to assets of an irrevocable grantor trust that are not included in the grantor’s gross estate.
Some tax practitioners have sought to exclude trust assets from a client’s estate for years while adjusting for the step-up basis upon death. Revenue Ruling 2023-02 is the first effort by the IRS to clarify basis adjustment formally. Although Revenue Rulings are not binding on any federal court, they represent the argument the IRS will take. Taxpayers will likely litigate the issue in the future, but for now, experts recommend following the IRS ruling as a safe course of action.
For more information see Jeff Stimpson “IRS Rules Against A Tax Tactic For Irrevocable Grantor Trusts” Financial Advisor Magazine, May 1, 2023.
Special thanks to Joel C. Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.