Recent IRS Challenges to Grantor Retained Annuity Trusts (GRATs)
Recent IRS Challenges to Grantor Retained Annuity Trusts (GRATs)
Conventional estate planning wisdom has been to treat grantor retained annuity trusts (GRATs) as riskless estate planning vehicles. That treatment, however, may no longer be accurate, as there have been two separate significant IRS challenges to GRATs in the context of ongoing merger negotiations going back to 2019 that have garnered considerable attention. First, in a case that has now settled very favorably for the taxpayer, the IRS withdrew its previous position in Chief Counsel Advice (CCA) 201939002 that had rejected the use of standard methodology in valuing publicly traded stock transferred to a GRAT that did not take into account pending merger discussions. Baty v. Commissioner, Tax Court Docket No. 12216-21 (stipulated decision entered June 17, 2022). However, the IRS applied the draconian “Atkinson rationale” (in effect, blowing up the GRAT as disqualified) to another GRAT with a valuation issue in connection with an anticipated merger in CCA 202152018, which is now a pending case. Presenter Kevin Matz will summarize these cases, and the lessons to be learned from them.
Kevin Matz, Esq.
As a trusted adviser to clients with significant wealth, Kevin Matz, Partner at ArentFox Schiff focuses on domestic and international estate and tax planning, estate administration, and related litigation.
