October 2008 TOC

Wall Street is wailing; the economy is ailing; and in the end it’ll likely be us taxpayers who’ll be bawling over Bush’s bailing out of financial firms.

On The Cover

Wall Street is wailing; the economy is ailing; and in the end it’ll likely be us taxpayers who’ll be bawling over Bush’s bailing out of financial firms. To try to keep our sense of humor in all the angst, we chose for our cover Yin Jun’s oil painting “Crying.” Imagine this image in your living room; it’s 47.2 inches wide by 39.5 inches high and sold for a mere $15,000 at Christie’s “First Open Post War & Contemporary Art” auction on Sept. 9, 2008, in New York. Jun, a contemporary Chinese artist, apparently specializes in hysterical children turning on the waterworks; check out his other works at www.artnet.com/artist/424687606/yin-jun.html. Other pieces sold at that Christie’s auction and featured in this issue are by a more famous but still playful artist, Alexander Calder:

• p. 18—an untitled piece that Calder painted in 1972 sold for $40,000;

• p. 60—another untitled piece, this one painted in 1970, sold for $37,500.


Tax Law Update

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

•Estate of Kalahasthi v. United States—in which the Internal Revenue Service found that a woman who committed suicide because her husband died in the 9/11 terrorist attacks, is not herself a “victim” for purposes of Internal Revenue Code Sections 2201 and 692. These sections provide a reduced estate tax rate for estates of terrorist attack victims.

• Private Letter Ruling 200836027—in which the IRS denied a deduction for interest that accrued during an IRC Section 6161 extension.

14/ Tax Boundaries For Community Foundations

David T. Leibell and Daniel L. Daniels, partners in the Stamford, Conn. office of Wiggin and Dana LLP, report on PLR 200832027, in which the IRS sets parameters for what services a community foundation can offer to local private foundations for a fee, without incurring unrelated business income tax.


Estate Planning & Taxation

20/ The Resurrection

By Edward A. Renn & N. Todd Angkatavanich

The IRS’ decade-long attack on family limited partnerships (FLPs) has taken a new turn. The Service successfully revived the Section 2703 argument in Holman. Now, practitioners must adjust. The authors explain how, and they warn: Don’t be surprised if the IRS breathes life into other arguments against FLPs that have long been thought dead.

Edward A. Renn and N. Todd Angkatavanich are partners in Withers Bergman LLP, practicing out of the Greenwich, Conn., and New Haven, Conn. offices.

30/ The Case for Principle Trusts And Against Incentive Trusts

By David A. Handler & Alison E. Lothes

Guidance for trustees is good; incentive trusts are not. Ditch the incentive trust approach, which puts trustees in handcuffs and has many unintended consequences. Instead, use a principle trust, which outlines objectives but doesn’t provide prescriptives. A guide.

David A. Handler is a partner in the Chicago office of Kirkland & Ellis LLP. He’s also a member of the Trusts & Estates advisory committee on estate planning and taxation. Alison E. Lothes is an associate in the Chicago office of Kirkland & Ellis LLP.

Special Report


36/ Asset-gathering Machines

By Halah Touryalai

Clients and even wirehouse brokers themselves are fleeing Wall Street firms—and flocking to independent registered investment advisors (RIAs). Studies of the first half of 2008 show dramatic increases at RIAs. The fall’s economic meltdown only seemed to add to the exodus from wirehouse firms.

Halah Touryalai is a New York-based reporter at Penton Media’s Registered Rep. magazine.

39/ Registered Rep.’s Top 100 RIAs in America

See where the money is going.

44/ Only the Strong Survive

By Beth Mattson-Teig

Financing hurdles slow tenant-in-common deals, sidelining a growing number of sponsors.

Beth Mattson-Teig is a Minneapolis-based freelance journalist and frequent contributor to Penton Media’s NREI, a magazine for the national real estate investor.

49/ 2008 TIC Directory

Still standing: a guide to the members of the Tenants-in-Common Association, the trade association serving the fractional ownership industry.



58/ What Price Phelps’ Gold?

By Jeffrey M. Risius

As many of us cheered Michael Phelps to beat Mark Spitz’s record and take home eight gold medals during the 2008 Summer Olympics, the tax and valuation geeks among us wondered how those medals could be valued for gift or estate tax purposes. Curious? Valuation expert Jeffrey M. Risius has given the matter some deep consideration.

Jeffrey M. Risius is a managing director of the valuation and financial opinions practice at Stout Risius Ross Inc. He’s based in the Southfield, Mich. office.

Estate Planning & Taxation

62/ Throw Me From the Train

By Barry A. Nelson

As author Barry A. Nelson puts it: “Death and taxes are certain, but their dates and rates are not.” Let’s be frank, folks. The death tax deductible is going to jump all over the board in the next few years, so it’s time to hold our noses and revise our health care directives. Spare your family the angst of deciding for themselves; tell them now. If you fall terminally ill, do you want them to delay pulling the plug until Jan. 1, 2009, or even Jan. 1, 2010, so that they can inherit substantially more? And how about if you’re on death’s door at the end of 2010? Should they hasten your death so they don’t get slammed by the death tax returning to draconian rates on Jan. 1, 2011? You can always revise your directive if Congress actually gets its act together long enough to address estate tax reform.

Barry A. Nelson is a partner in North Miami Beach, Fla.’s Nelson & Nelson.


In the September 2008 issue, “When the Stretch Snaps: Computing Damages,” incorrectly stated two amounts on page 50, in the first of the article’s two financial illustrations. The corrected illustration should read: “Jack cashes out his $1 million IRA immediately, while Jill waits one year to do so. At the end of the year, Jack’s $600,000 after-tax cash out should have grown at 6.7 percent (after-tax) to $640,200. And the present value of Jill’s $660,000 cashout was $618,556.” Note that the article correctly stated that Jill’s present value beat Jack’s by $18,556.

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