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§ 9.10 RETIREMENT PLAN ACCOUNTSDuring the trial, it was shown that the stock was issued as part of a reorganizationthat took the form it did to enable the individuals to retain control of andparticipate in the future growth of the issuing company and to “freeze” thevalue of a portion of their equity in the corporation for estate tax planning purposes.The trial court concluded: “We are not persuaded that he [one of the taxpayers]was unaware that the consequences of such a [charitable] deductionwould be avoidance of ordinary income tax on the bail-out of corporate earnings.”276 The court concluded that the individuals did not meet their burden to“clearly negate” the assertion that avoidance of federal income tax was one ofthe principal purposes of the disposition of the section 306 stock. 277On appeal, the appellate court held that the burden of proof on the donorswas “heavy”; it disagreed with the individuals’ position. The appellate courtconcluded that “a finder of fact could reasonably infer that . . . [the principalindividual] knew of the tax consequences at the time he made his donations.” 278This individual was characterized as a “successful and sophisticated businessman”;the court noted that he sought and received a ruling from the IRS that thestock, when originally issued, was section 306 stock. 279 His testimony at trial thathe did not have the tax consequences of his charitable contributions in mind atthe time he made them was held by the court of appeals to be self-serving andthus was disregarded. Although these charitable actions were found to be “generous,sincere, and praiseworthy,” 280 the appellate court found that these individualsfailed to meet their burden of proof, thereby defeating their attempt tosecure capital gain treatment for the stock should it have been sold and to securea full fair market valuation for their gifts.§ 9.10 RETIREMENT PLAN ACCOUNTS 281The federal tax laws embody preferences for charitable contributions of someforms of property over others. Thus, for example, while a donor is alive, he orshe usually will enjoy preferential income tax benefits from giving long-termcapital gain property rather than gifts of cash or ordinary income property. 282Federal tax law also favors gifts of certain forms of property at death. Thus,donors and their heirs are generally in a preferred tax position if charitablebequests consist of property that generates income in respect of a decedent.(a) Income in Respect of DecedentProperty that generates income in respect of a decedent (IRD) is inherited propertythat, had the decedent received it before death, would have been taxable incometo the decedent. This is an important exception to the general rule that inherited276 Pescosolido v. Commissioner, 91 T.C. 52 (1988).277 Id. at 60.278 Pescosolido v. Commissioner, 883 F.2d 187 (1st Cir. 1989).279 Id. at 190.280 Id.281 This section is based in part on materials prepared by Christopher R. Hoyt, Esq., Professor of Law, Universityof Missouri-Kansas City, with Professor Hoyt’s permission.282 In general, see § 4.3. 303