NOVEMBER 2006

Every episode of the original Star Trek television series began with a voiceover explaining that the featured starship’s mission was to “boldly go where no man has gone before.” Now Christie’s has helped collectors to do the same (sort of) by buying 1,000 never-before released items from the first TV series and its many spinoffs.

Marking the 40th anniversary since the original show first aired, Christie’s held an auction “40 Years of Star Trek: The Collection,” in New York from Oct. 5 through Oct 7. On sale from the archives of CBS Paramount Television Studios were costumes, props and detailed models of the Starship Enterprise and the alien spaceships it met in outer space. The prices for many of these items soared past original estimates, making the auction total skyrocket to more than $7 million.

Featured on our cover this month is a photograph (circa 1966 to 1969) from the original TV series. Shown from left to right are the actors Leonard Nimoy (as the character Mr. Spock), William Shatner (as Captain James T. Kirk) and James Doohan (as Scotty.)

Among the auction items featured in this issue are:

  • p. 40—a 78-inch model Starship Enterprise-D, from the spinoff series Star Trek: The Next Generation, which sold for $576,000;
  • p. 57—a uniform worn by Captain Kirk in the original TV series, which sold for $28,800.
  • p. 64—a tri-dimensional chess set, which first appeared in the original Star Trek TV series, which fetched $28,800.

BRIEFING

Tax Law Update
David A. Handler, partner in the Chicago office of Kirkland & Ellis LLP, reports on:

  • Private Letter Ruling 200637021—which addressed whether a taxpayer would hold a general power of appointment if that taxpayer acted as trustee; the answer was “no;”
  • Brownstone v. United States—which found no income tax deduction for a trust’s payment to charity pursuant to a power of appointment; and
  • Robert Dallas v. Commissioner—which rejected the notion that the price paid for stock established the stock’s fair market value.

Charitable Giving: What Not To Do

David T. Leibell and Daniel L. Daniels, partners in the Stamford, Conn. office of Cummings & Lockwood LLC, report that the recently released Technical Advice Memorandum 200628026 provides a lovely roadmap on how not to administer a charitable remainder trust.

FEATURES
ESTATE PLANNING & TAXATION

Report From the Front:
Defending Discounts
By Joseph F. McDonald, III and Amy K. Kanyuk

The war with the Internal Revenue Service over discounts for family limited partnerships (FLPs) starts at the audit. Learn from two attorneys who engage in those battles regularly how to best protect your client during that phase and on appeal. These authors offer tips on whether to waive privilege during the audit and the importance of a well-prepared report by a respected valuation expert. Favorable settlements are within your grasp.

Joseph F. McDonald, III is a partner at McDonald & Kanyuk, PLLC, in Concord, N.H.

Amy K. Kanyuk is a partner at McDonald & Kanyuk, PLLC, in Concord, N.H.

Revocable GRATs
By Edward M. Manigault and
Milford B. Hatcher, Jr.

Although grantor retained annuity trusts (GRATs) are valuable estate-planning vehicles, they can be difficult to create and implement. So revocable GRATs may be a good option: They can help advisors plan for clients who may later become incapacitated, and permit settlors to grant to a GRAT an option on property. A guide.

Edward M. Manigault is a partner at Jones Day in Atlanta.

Milford B. Hatcher, Jr. is a partner at Jones Day in Atlanta.

Crummey Powers Can
Increase Your Income Tax
By Laura H. Peebles

It’s often overlooked, but Crummey powers can create unanticipated income tax consequences. In some cases, these surprises do not become apparent until later, perhaps when a question arises regarding a trust’s qualification as a subchapter S shareholder. Don’t be surprised.

Laura H. Peebles is a director of Deloitte Tax LLP in Washington.

Special report
asset protection

Offshore, Legitimately
By J. Richard Duke

“Offshore” has gotten a lot of bad press lately, mostly because it’s seen as a way to avoid U.S. taxes. It is not. It’s a viable option for law-abiding Americans, and there are a number of valid, tax-neutral, reasons for going offshore. The top two are to protect assets from potential future creditors and to purchase life insurance.

J. Richard Duke is a shareholder at the Duke Law Firm, P.C., in Birmingham, Ala.

Ninth Circuit Treads
On an Established Right
By Gideon Rothschild and Daniel S. Rubin

The U.S. Court of Appeals for the Ninth Circuit recently overreacted to two taxpayers and produced a decision in a case called Townley that declared it fraudulent to protect assets against any creditor, even a future unknown and unknowable one. That ruling flies in the face of all established law. Authors Gideon Rothschild and Daniel S. Rubin explain.

Gideon Rothschlid is a partner at Moses Singer LLP in New York. He also servies on the editorial advisory board of Trusts & Estates and is the magazine’s chief consultant on asset protection planning.
Daniel S. Rubin is a partner at Moses Singer LLP in New York.

Rules of Engagement
By Denis A. Kleinfeld

Advisors should know how to navigate the asset protection battlefield. That means having a solid understanding of creditor/debtor law, contempt of court, and the defense of impossibility. Problem is, there are conflicting legal decisions and commentary that muddy the waters. Here, Denis A. Kleinfeld articulates the basic principles underlying asset protection law and identifies the legal framework for contempt-of-law actions.

Denis Kleinfeld is a principal of both The Kleinfeld Law Firm, LLP based in Miami and Kleinfeld Global Services, LLC in the U. S. Virgin Islands. He’s also general counsel of Four Points Family Office LLC in the Virgin Islands.

PERSPECTIVES
VALUATIONS

At Last, a Valid Way To Value S Corps
By Bret A. Tack

The Delaware Chancery Court recently set the U.S. Tax Court straight by showing it the proper way to value estate and gift tax for S corps and C corps. In instances in which a company distributes all of its income, the court applied a simple method of valuation; when a company distributes less than all of its income, the court’s model can be adjusted to demonstrate a decrease in the value of the S corp benefits. Learn why author Bret A. Tack considers the court’s decision in Delaware Radiology the best judicial treatment of this highly controversial S corp issue to date.

Bret A. Tack is the managing director of Cogent Valuation in Los Angeles.

TAGS: Research
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