In PLRs 202006002 through 202006006, the Service ruled that as long as trusts qualified as domestic trusts and a Power of Appointment Committee (Committee) remained in existence, the grantor would not be treated as the owner of the trust under the grantor trust rules.
For each PLR, because none of the Committee members had a power exercisable by him/herself to vest trust income or corpus in him/herself, none were treated as the trust owner.
For each PLR, the circumstances attendant on the operation of the trust determines whether the grantor is treated as the trust owner under Code Sec. 675.
For each PLR, the grantor’s contribution of property to the trust did not qualify as a completed gift subject to federal gift tax because the grantor retained its consent power over the trust income and principal. Moreover, the retention of the grantor’s consent power, sole power and testamentary power caused the transfer of property to the trust to be incomplete for federal gift tax purposes. Also, the Committee members possessed a unanimous member power over income.
For each PLR, any distribution of property by the Committee from the trust to the grantor would not be a completed gift, subject to federal gift tax, by any member of the Committee.
Any distribution of property by the Committee from the trust to any beneficiary of the trust, other than the grantor, would not be a completed gift by any member of the Committee, other than the grantor.
No member of the Committee, upon his or her death, would include in his or her estate any property held in the trust because the member is deemed to have a general power of appointment over the property held in the trust.
Finally, the basis of all community property in the trust on the date of death of the predeceased grantor would receive an adjustment in basis to the fair market value of such property at the date of death of the said grantor.
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Posted by Lewis J. Saret, Co-General Editor, Wealth Strategies Journal.