November 2012 | Issue 61
On October 22, 2012, the IRS voluntarily withdrew its appeal of Wandry v. Commissioner – (T.C. Memo 2012-88 (March 26, 2012)).
Readers may recall that the Tax Court, in its Wandry decision, provided encouragement to estate planners about the use of so-called “formula clauses” to keep the size of a difficult-to-value gift within the bounds of a gift tax exclusion. What the Tax Court found acceptable in the Wandry case was a formula clause used by the taxpayer which defined the amount of a gift in terms of its dollar value rather than as a percentage interest. The Wandry formula, unlike earlier versions of formula clauses, (Christiansen, Petter, and McCord), also did not require for its operation that excess value be given to charity. See further discussion at Hempstead E-Letter No. 57.
The IRS Relents
The IRS, in August 2012, noticed an appeal from the Wandry decision to the 10th Circuit Court of Appeals. In October, it voluntarily withdrew its appeal.
When the IRS filed its notice of appeal, many hoped that the issue of the acceptability of formula clauses would finally be settled in at least one federal jurisdiction.
Now we don’t know.
IRS Circular 230 disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding any penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction(s) or tax-related matter(s) addressed herein.