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Recent Powell Case

On May 18, 2017, the Tax Court (148 T.C. No.18) decided against the taxpayer with facts that involved a deathbed transfer. Assets were transferred from decedent’s revocable trust to a family limited partnership by her son under decedent’s power of attorney. Decedent’s son became the general partner and the decedent received all of the limited shares. Decedent’s son, under the power of attorney of decedent, then transferred all the limited shares to a Charitable Lead Annuity Trust. The decedent died 7 days thereafter. Understandably the deathbed facts were terrible for the taxpayer. The Court decided to tax the assets under section 2036 (a) (1) (decedent with her son as both general partner and the agent of her power of attorney could retain enjoyment of income), and surprisingly, under 2036 (a) (2) (decedent with her son could dissolve the partnership and also with her son, the general partner and power of attorney agent, could control distributions). The Tax Court in Powell agreed with the reasoning in the Strangi case decision that Byum fiduciary requirements did not apply in Powell.

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