TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Tuesday, August 10, 2010

Dissent: 2d Circuit 'Turns § 2036 on its Head' in Reversing Tax Court

A divided Second Circuit yesterday reversed the Tax Court (T.C. Memo. 2006-225) and held that § 2036 did not apply to a mother's transfer of 49% of a Manhattan brownstown to her adult son after her diagnosis of pancreatic cancer even though she continued to live in the home with her son.  Estate of Stewart v. Commissioner, No. 07-5370 (2d Cir. Aug. 9, 2010). In a 20-age dissent, Judge Livingston argued that the majority "turns the proper – and longstanding – construction of § 2036 on its head. It also opens up a loophole that will vitiate to a considerable degree the efficacy of this section, in conjunction with the uniform rate schedule now applicable to estate and gift taxes, in ensuring that the estate and gift taxes are equitably imposed on all those subject to them."

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