Defined-Value Clauses

Whenever a client wants to cap gift tax exposure, planners should consider using a defined-value clause implemented by use of an escrow trust. A defined-value clause limits the quantity of assets gifted or sold until a final determination of value is made. Because of the Tax Court's 2003 decision in McCord v. Commissioner1 and recent rulings by the Internal Revenue Service, practitioners are worried

Whenever a client wants to cap gift tax exposure, planners should consider using a defined-value clause implemented by use of an escrow trust.

A defined-value clause limits the quantity of assets gifted or sold until a final determination of value is made. Because of the Tax Court's 2003 decision in McCord v. Commissioner1 and recent rulings by the Internal Revenue Service, practitioners are worried that courts might not respect these formula clauses. On the one hand

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