Transfers of Joint Property in Contemplation of Death: A Call for Immediate Statutory Revision

For years the Tax Court sided with the government and the Court of Appeals for the Third Circuit in asserting that the contemplation-of-death provision of the estate tax act was sufficiently elastic to include the tax concept of ownership reflected in the joint-property provision of the same act. The alliance between those tribunals on this point was recently broken, however, when the Tax Court shifted to the competing view supported by taxpayers and the appellate court for the Ninth Circuit. It now believes that the two provisions mentioned above are complete strangers even though at one time these two were consecutive subsections of the same section. The consequence, if that court is right: Certain inter vivos arrangements, though entered into in contemplation of death, will effectively and substantially reduce anticipated estate taxes which would otherwise be assessed. This saving is effected by an exclusion from the gross estate and will, if the arrangement is properly planned, be in addition to that expected from the marital deduction.