Wendy C. Gerzog

Not All Defined Value Clauses are Equal

Defined value clauses used to value nonmarketable family limited partnership (FLP) interests create valuation distortions and other public policy issues. This paper describes these abuses and proposes the employment of restrictions similar to those applied to pecuniary formula marital deduction clauses. The article explains how pecuniary formula marital deduction provisions created valuation distortions by allowing for undervaluation of the marital share that were remedied by the IRS’s Rev. Proc. 64-19 and the enactment of section 2056(b)(10). The article analyzes recent case law expanding the use of defined value clauses into the FLP area and criticizes the courts for not applying the public policy doctrines of Procter and Robinette to those cases. The article distinguishes defined valuation clauses in the FLP context and shows how all fixed value clauses are not equivalent. Finally, the article proposes solutions to deal with the valuation distortions that these clauses create.

The Marital Deduction QTIP Provisions: Illogical and Degrading to Women

In 1981, Congress enacted the qualified terminable interest property (QTIP) provisions that allow an estate and gift tax marital deduction for the full value of the underlying property where a spouse receives only a qualifying income interest for life and where the executor of the estate or the donor spouse makes a timely election. The article reviews the history of the marital deduction and its evolved rationale, explains and analyzes the current QTIP provisions together with their supposed comity with the decision to adopt the marital unit as the proper unit of transfer taxation, illustrates how the QTIP demeans women, and proposes that Congress repeal the QTIP provisions.