Contents

ESTATE AND GIFT TAX CONSIDERATIONSrefund claim for estate taxes paid. The IRS contended that a codicil republishes awill as of the date the codicil is executed, so that the subject will must be deemedto have been executed in 1982—and thus not before 1979, so that the trust was notreformable. The representative of the estate contended that, under applicable statelaw, the doctrine of republication is not applied when it would defeat a testator’sintent. The court accepted the representative’s view and strictly construed statutorylanguage stating that the will must be executed before 1979. 239In still another case, a court held that a split-interest charitable trust thatfailed to qualify for the estate tax charitable deduction could not be convertedinto a qualifying trust under the reformation rules, because there was not atimely judicial proceeding. 240 The trust involved did not qualify as an eligiblecharitable remainder trust. It was subsequently amended pursuant to state law;the estate contended that this amendment constituted a change in the trust sothat it was reformed into a qualified remainder trust, eligible for the estate taxcharitable deduction. The IRS, however, asserted that the reformation was nottimely, 241 in that the proceeding that led to amendment of the trust took placenearly two years after the deadline. The estate argued that a filing with the stateprobate court commenced the requisite judicial proceeding (the filing was beforethe deadline). The filing was technically corrected on a point of law; thisprompted the estate to contend that, because the correction was made shortlybefore the case was submitted, the reformation was timely. But the court rejectedthat reasoning, observing that it contravened congressional intent, in that itwould enable an estate to qualify simply by obtaining a retroactive trust amendmentafter passage of the reformation rules deadline.It has been held that the federal government is not entitled to interest againstan estate, when the entirety of the estate’s assets passed to a charitable organizationfollowing reformation of a testamentary trust. 242 The decedent’s will containeda defective split-interest trust. The estate tax return included a claim for acharitable deduction for the value of the remainder interest passing to charity, inanticipation of a successful reformation. Subsequently, the IRS assessed interest,on the premise that no deduction was allowable at the time the estate tax returnwas filed, until reformation of the trust. The first court to review this matter readoverall tax law as meaning that a tax is due as of the time a return must be filedand that interest begins to accumulate as of the return due date. In this case, wrotethe court, the estate was not entitled to the charitable deduction at the time thereturn was due, so the interest obligation began to run. An appellate court disagreed,however, holding that an amendment to a will made pursuant to the reformationprocedure is retroactive to the date of the testator’s death. It concluded239 In a case applying the effective date rule (see note 230), an individual executed his will on November 9, 1978,and died on December 31, 1978. The court held that his estate and a split-interest trust were governed by thelaw in effect on July 17, 1984, so that the reformation provision was not available (thus precluding any estatetax charitable deduction for remainder interests passing to charity). Reddert Estate v. United States, 96-1U.S.T.C. 60,230 (D.N.J. 1996). An instance of application of the effective date rule allowing reformation ifthe will was executed before January 1, 1979, is Tech. Adv. Mem. 8817004, wherein the date of death wasafter July 17, 1984.240 Hall Estate v. Commissioner, 93 T.C. 745 (1990).241 See text accompanied by note 229.242 Oxford Orphanage, Inc. v. United States, 775 F.2d 570 (4th Cir. 1985). 262