Revenue Ruling 2023-2 What It Means and What You Might Do?

September 8, 2023

Do assets in an irrevocable grantor trust that are not included in the settlor’s gross estate qualify for an income tax basis step up on the death of the grantor? In 2002, Jonathan Blattmachr and Professor Mitchell Gans, along with Hugh Jacobson, authored an article analyzing this matter. This issue seems to stir up as many opinions and strong emotional reactions today as it did when it was first published. After several powerful Senators wrote a letter to Janet Yellin, the IRS issued Revenue Ruling 2023-2 stating that, in the opinion of the Service, there is no basis step up for assets in a grantor trust not included in the settlor’s estate. The IRS indicated that Code Section 1014 is inapplicable because there is no estate-tax inclusion and it is not a bequest under state law. While you might have heard strong opinions pro and con on this point, what does the law actually say? This program will give you an objective, intelligent and academic presentation on this fundamental estate planning issue. The Ruling states that it is inapplicable if there is debt between grantor and trust at death. What does that mean? The program will provide a discussion of Rev. Rul. 77-402, Rev. Rul. 85-13,  Rev. Rul. 2023-2, CCA 200937028, PLR 201245006, Backemeyer 147 T.C. 526, Sections 1012, 1014 and 1015, and more! What is property acquired from a decedent or that passed from a decedent within the meaning of Section 1014? When is property considered acquired by bequest, devise, or inheritance within the meaning of that section? Is there gain triggered at death if the note was still outstanding?  The presentation will conclude with practical and balanced advice as to what practitioners might consider doing in practice. It will also provide a way in which the equivalent of the step-up in basis at death for assets in a grantor trust may potentially be achieved even if Rev. Rul. 2023-2 is correct.  This guidance will differ from several recently published articles on Rev. Rul. 2023-2.   Speakers: Jonathan G. Blattmachr, Esq., Professor Mitchell M. Gans, Esq. and Martin Shenkman, Esq.   *This may constitute attorney advertising. No CPE, CLE given.