SAN FRANCISCO — March 3, 2022 — G. Michelle Ferreira, Tax Practice shareholder and co-managing shareholder of the San Francisco and Silicon Valley offices at global law firm Greenberg Traurig, LLP, led the litigation of the Estate of Marion Levine, to an outstanding victory in the United States Tax Court with a full Tax Court Opinion.
Decedent, Marion Levine, “entered into split-dollar life- insurance arrangements which required her revocable trust to pay premiums for life-insurance policies taken out on the lives of her daughter and son-in-law. When the arrangements terminate, [her] revocable trust has the right to be paid the greater of the premiums paid or the cash surrender value of the policies.” The Internal Revenue Service challenged the arrangement for estate tax purposes, arguing that either the amount Decedent paid for the policies, $6.5 million, or the cash surrender value, $6.1 million, was includible in her gross estate, not the value of the split-dollar receivable reported on the estate tax return, $2.2 million.
Analyzing the Commissioner’s legal challenges to the arrangement under Internal Revenue Code Sections 2036, 2038 and 2703, Tax Court ultimately found that the Decedent retained the split-dollar receivable, and nothing else on the date of death. Only the insurance trust held that right to the cash surrender value of the policies. Thus, the Tax Court held that Decedent possessed a receivable created by the arrangements, which was only the right to receive the greater of the premiums paid or the cash surrender value of the policies when they are terminated. In other words, the reporting of the receivable, $2.2 million, on the date of death for estate tax purposes was correct and the Estate prevailed in the litigation.
“We are very pleased with the Tax Court's opinion overall. We are particularly pleased that Sections 2036, 2038 and 2703 do not apply to bring the cash surrender value or the premiums paid back into the gross estate, as the Commissioner had argued," Ferreira said. "Instead, the split dollar receivable reported on the estate tax return is the correct date of death value. Most importantly, I can say that the client is stunned — in a very positive way.”
Ferreira counsels individuals, partnerships, estates, and corporations in tax disputes with the Internal Revenue Service and state and local tax agencies, including the California Franchise Tax Board, the State Board of Equalization, the Employment Development Department and county assessment appeals boards. As a former tax litigator for the Internal Revenue Service, Ferreira brings unique experience to clients who have complex and sensitive tax and penalty disputes. Ferreira represents clients before the IRS, and state and local tax agencies at the audit, collection, appeals and litigation stages.
Ferreira has more than 25 reported decisions in the U.S. Tax Court and the U.S. District Courts on issues such as unreported income, offshore accounts and penalties, family limited partnerships, civil and criminal tax fraud, penalty assessments, statutes of limitation assertions, valuation disputes, controversies involving valuation discounts for lack of control and lack of marketability, tax shelters, hobby losses, complex real estate transactions, tax structured transactions, and unsubstantiated business expenses.
About Greenberg Traurig's Tax Practice: To stay competitive in today's global marketplace, international companies must seek out greater efficiency in their tax planning and compliance, including coordinating tax decisions from country to country. For U.S. operations, an environment of increased scrutiny – including passage of more restrictive legislation and a spike in audit activity at every level – is quickly becoming the norm, likewise spurring a need for greater self-evaluation and for more frequent representation in controversies and litigation with tax authorities. Greenberg Traurig’s multidisciplinary tax team works closely with clients to address these and other tax planning needs, as well as tax controversies and litigation issues.
About Greenberg Traurig: Greenberg Traurig, LLP has more than 2400 attorneys in 42 locations in the United States, Europe, Latin America, Asia, and the Middle East. The firm, often recognized for its focus on philanthropic giving, innovation, diversity, and pro bono, reported gross revenue of over $2 Billion for FY 2021. The firm is consistently among the top firms on the Am Law 100, Am Law Global 100, NLJ 250, and Law360 (US) 400. On the debut 2022 Law360 Pulse Leaderboard, it is a Top 15 firm. Greenberg Traurig is Mansfield Rule 4.0 Certified Plus by The Diversity Lab and net carbon neutral with respect to its office energy usage. Web: www.gtlaw.com.