Private Foundations:

Lowering Or Avoiding Capital Gains Tax

Billion Dollar Law & Tax Mistakes

Here are 101 cases that cover a range of business succession, intellectual property, estate planning, and advanced estate and tax planning strategies... that went wrong!!!

The goal: Learn from someone else's mistakes so you don't have to make them, and your family does not have to face the consequences of your mistakes


BUSINESS SUCCESSION MISTAKES, MYTHS, GAPS, AND TRAPS THAT CAN ERODE YOUR LIFE'S WORK...

  1. Myth #1: The Giustina Case: Why Your LLC Is a Roadblock, Not a Shield, Against Probate (IRC §2033)

  2. Myth #2: The Strangi Case: You Transferred Your Business to a Trust, But the IRS Still 'Clawed It Back' (IRC §2036)

  3. Myth #3: The True v. Commissioner Case: Why a "Dusty" Buy-Sell Agreement Won't Save You from the IRS (IRC §2703)

  4. Myth #4: The Maggos Case: Your "Freeze" Technique Backfired—Here's Why (IRC §§2036, 2038)

  5. Myth #5: The Eddy Case: A Missed 9-Month Deadline Cost This Estate Millions in Taxes (IRC §2032)

  6. Myth #6: The Anderson Case: Why a Lack of Valuation Can Cost an Estate Millions (IRC §2031(b))

  7. Myth #7: Your Will Is a Map to Probate, Not a Way to Avoid It (UPC §3-101)

  8. Myth #8: The Family Business Case: Your Family Has No Authority to Run Your Business Without This Document (UPC §3-307)

  9. Myth #9: The ILIT Audit: How Your "Tax-Free" Life Insurance Could Still Be Taxed (IRC §2042)

  10. Myth #10: The Church & Giselman Cases: The IRS Knows About Your Gifts, Even If You Didn't File the Paperwork (IRC §2511)

  11. Myth #11: The Steinberg Case: An Improperly Structured LLC Can Lead to Probate (UPC §2-101)

  12. Myth #12: The Dorn Case: Your "Phantom Equity" Isn't Invisible to the IRS (IRC §§2036, 2038)

  13. Myth #13: The Robinson Case: Procrastinating on Your Valuation Cost an Estate Millions (IRC §§2031, 2032)

  14. Myth #14: The Church v. U.S. Case: Gifting Property, Not Just Cash, Can Trigger Tax Penalties (IRC §2511)

  15. Myth #15: The Littick v. Comm. Case: An Internal Price Agreement Won't Fool the IRS (IRC §2703)

  16. Myth #16: The Klauss Case: The IRS Can Reject Your Valuation and Apply Its Own (IRC §2031)

  17. Myth #17: The True v. Commissioner Case: Why a "Dusty Document" Is Worthless in an Audit (IRC §2703)

  18. Myth #18: The Maxine Robinson v. Comm. Case: A Missing "Death Clause" Caused a Valuation Dispute (UPC §2-101)

  19. Myth #19: The S-Corp Case: How a Will Can Accidentally Cause Your S-Corp to Lose Its Tax Status (IRC §1361(b) (1) (B))

  20. Myth #20: The Thompson v. Comm. Case: Registering IP in an LLC Doesn't Protect It from Estate Tax (IRC §§2036, 2038)

  21. Myth #21: The Joint Bank Account Case: Joint Accounts Don't Grant Legal Control of a Business (Uniform Probate Code)

  22. Myth #22: The IRS v. Coinbase Case: Your Crypto Is Trackable, Taxable, and Easily Lost Forever (IRC §2031)

  23. Myth #23: The Estate of German Case: Your Revocable Trust Avoids Probate, But Not Estate Tax (IRC §2038)

  24. Myth #24: The Estate of Gallo Case: No Plan Means Family Fights That Cost Millions in Legal Fees (UPC §3-112, IRC §2031)

  25. Myth #25: The Estate of Linton Case: The IRS Will Tax a Paper-Only Gift (IRC §2511)

  26. Myth #26: The Estate of Wheeler Case: Deathbed Transfers Are a Red Flag for the IRS (IRC §2035(a))

  27. Myth #27: The Estate of Powell Case: Serving as a Trustee of Your Own Irrevocable Trust Puts Your Assets at Risk (IRC §§2036, 2038)

  28. Myth #28: The S-Corp Case: A Will Can't Transfer S-Corp Shares to Just Anyone (IRC §1361)

  29. Myth #29: The Hackl v. Commissioner Case: Don't Assume Your Gifts Are Under the Exclusion Limit (IRC §2503(b))


    INTELLECTUAL PROPERTY THAT WAS DESTROYED AND DILUTED DUE TO POOR PLANNING...

  30. Myth #30: The Thompson v. Comm. Case: Your "Personal" IP Is Part of Your Taxable Estate (IRC §2031)

  31. Myth #31: The Steinberg v. U.S. Case: Registering Your IP Is Just Step One to Avoiding Estate Tax (IRC §2031)

  32. Myth #32: The Estate of Prince Case: A Lack of Planning Can Freeze Your IP Rights and Royalties for Decades (IRC §2033)

  33. Myth #33: The Thompson v. Commissioner Case: Your Personally Owned Patent Isn't Licensed to Your Business by Default (IRC §2036)

  34. Myth #34: The Powell v. Commissioner Case: An LLC Won't Protect Your IP If You Retain Control (IRC §2038)

  35. Myth #35: The Estate of German Case: Your Revocable Trust Won't Remove IP Value from Your Estate (IRC §2038)

  36. Myth #36: The Michael Jackson Estate Case: Don't Underestimate the Value of Your IP (IRC §2031)

  37. Myth #37: The Estate of Cecil v. Commissioner Case: The IRS Will Assign a Value to Your Trademark (IRC §2031(b))

  38. Myth #38: The Estate of Steinberg Case: The IRS Can Include Future Royalties in Your Estate's Valuation (IRC §§2031, 691)

  39. Myth #39: The Church v. U.S. Case: Informal Gifts of IP Are Ignored by the IRS (IRC §2511, §2701)

  40. Myth #40: The Whitney Houston Estate Case: Intangible IP is Not Safe from Estate Tax (IRC §2031)

  41. Myth #41: The Aretha Franklin Case: How a Handwritten Will Led to Chaos Over an $80M Estate

  42. Myth #42: The King of Random Case: A Digital Empire Can Be Lost Without a Trust

  43. Myth #43: Your Will Won't Protect a Real Estate Business from Probate

  44. Myth #44: The Thompson Case: Your Personal Brand Can Get Stuck in Probate, Freezing Ad Revenue

  45. Myth #45: The Bob Marley Estate: Why a Lack of a Will Led to Decades of Legal Battles Over a Multi-Million Dollar Estate

  46. Myth #46: The Jimi Hendrix Estate: Planning Isn't Just for Large Estates

  47. Myth #47: The Heath Ledger Estate: How Outdated Documents Can Result in Poor Asset Distribution

  48. Myth #48: The Robin Williams Case: Your Name and Likeness Are Property That Must Be Assigned

  49. Myth #49: The Amy Winehouse Case: Why Delaying Estate Planning Is the Enemy of Your Legacy

  50. Myth #50: The Philip Seymour Hoffman Case: Why Outdated Documents Can Be as Bad as Having No Documents at All

    LIFE INSURANCE MISTAKES AND TRAPS THAT DILUTE YOUR "INSURANCE POLICIES"

  51. Myth #51: The Estate of Kurihara Case: Retaining Control Over a Life Insurance Policy Triggers Estate Inclusion (IRC §2042(c))

  52. Myth #52: The Estate of Becker Case: The 3-Year "Look-Back" Rule Is Real and Can't Be Ignored (IRC §2035(a))

  53. Myth #53: The Kurihara Case: Paying Premiums for an ILIT from a Personal Account is a Red Flag for the IRS (Treas. Reg. §20.2042-1(c)(2))

  54. Myth #54: The ILIT Trustee Case: Serving as Your Own Trustee Is a "Red Flag" for the IRS (Treas. Reg. §20.2042-1(c)(2))

  55. Myth #55: The Corporate Policy Case: Why a Policy Owned by Your Corporation Still Counts in Your Estate (IRC §§2036, 2038)

  56. Myth #56: The Crummey Case: Waivers Are Not Enough—Beneficiaries Must Have a Real Withdrawal Right (IRC §2503(b))

  57. Myth #57: The Whole-Life Policy Case: Your Policy's Cash Value Can Trigger Estate Inclusion (Treas. Reg. §20.2042-1(c)(2))

  58. Myth #58: The Spouse Case: Paying Premiums for a Spouse-Owned Policy Still Counts (IRC §2042)

  59. Myth #59: The Split-Dollar Case: Retaining Any Right to a Loan or Dividend Can Kill Your Plan (Treas. Reg. §20.2042-1(c)(2))

  60. Myth #60: The Physician Case: Even Small Policies Can Push Your Estate Over Tax Thresholds (IRC §2042)

  61. Myth #61: The Levine Case: A Split-Dollar Arrangement Can Still Trigger Estate Inclusion (IRC §§2036, 2038)

  62. Myth #62: The Connelly v. United States Case: The Supreme Court Just Ruled That Corporate-Owned Insurance Can Be Included in Your Estate (IRC §§2036, 2038, 2703)

  63. Myth #63: The Estate of Levine Case: The IRS Taxes the Entire Benefit Stream of a Split-Dollar Deal, Not Just the Receivable (IRC §§2036, 2038, 2042, 2703)

  64. Myth #64: The Kurihara Case: The Timing of Your Transfer Can Overrule the Formal Documents (IRC §2035(a))

  65. Myth #65: The Kurihara Case: The IRS Can Attribute a Trustee's Actions to You (Treas. Reg. §20.2042-1(c)(2))

  66. Myth #66: The Levine Case: How the IRS Disregarded a Trust and Taxed a Split-Dollar Receivable (Treas. Reg. §1.61-22, IRC §§2036, 2038, 2703)

  67. Myth #67: An ILIT Modification Can Resurrect a Dead Tax Problem (IRC §§2035(a), 2038)

  68. Myth #68: The Kurihara Case: Retaining the Power to Change Beneficiaries Is a Red Flag for the IRS (Reg. §20.2042-1(c)(2))

  69. Myth #69: Heirs Paid Tax on "Income in Respect of a Decedent" (IRC §691)

  70. Myth #70: The Connelly v. United States Case: How One Policy Can Trigger Multiple Tax Penalties (IRC §§2036, 2038, 2042)

    HIGH-VALUE INVESTMENTS, DIGITAL ASSETS, STOCKS, AND ESTATE PLANNING MISTAKES

  71. Myth #71: U.S. v. Estate of German Case: A Revocable Trust Avoids Probate, But Not Estate Tax (IRC §2038)

  72. Myth #72: The Estate of Fick Case: A Will Is a Roadmap to Probate, Not a Way to Avoid It (UPC §2-502)

  73. Myth #73: The Estate of Littick Case: Stocks Are Frozen at Death Without This Simple Document (IRC §2031)

  74. Myth #74: The IRS v. Coinbase Case: Your "Invisible" Crypto Is Trackable and Taxable (IRS Notice 2014-21)

  75. Myth #75: The Estate of Young v. Commissioner Case: Joint Tenancy Is a Death Trap, Not a Solution (IRC §2040)

  76. Myth #76: The Estate of Braman Case: Why Your Vacation Home Can Trigger a Second Probate in Another State

  77. Myth #77: The Estate of Strangi v. Commissioner Case: The IRS Disregarded a Family Partnership for Retained Control (IRC §2704)

  78. Myth #78: The Estate of Giustina v. Commissioner Case: A Business Real Estate LLC Is Not Protected from Probate (IRC §2031, UPC §2-101)

  79. Myth #79: The Giselman v. Comm. Case: No Paperwork, No Gift—The IRS 'Clawed Back' Business Interests (IRC §2511)

  80. Myth #80: The Estate of Thompson Case: "Common Sense" Won't Save Your Business from a Legal Freeze

  81. Myth #81: The Estate of Fick Case: The Best Will Can't Fix a Title Mismatch (UPC §3-101)

  82. Myth #82: The Estate of Littick Case: Probate Delays Can Lead to a Higher Tax on Your Stock Portfolio (IRC §2031)

  83. Myth #83: The Estate of Steinberg Case: Your IP Needs a Trust, or It Will Get Frozen in Probate (IRC §2033)

    ADVANCED ESTATE AND TAX PLANNING + IRS DIRTY DOZEN SCAMS

  84. Myth #84: The Badgley v. United States Case: Dying During a GRAT Term Voids the Entire Plan (IRC §2036(a) (1))

  85. Myth #85: The Estate of Petter v. Commissioner Case: How Defined-Value Clauses Made a Sale to an IDGT a Success (IRC §675(4) (C))

  86. Myth #86: The Syndicated Easement Case: The IRS Is Disallowing Trusts and LLCs for Lacking Business Substance (IRC §§2703, 2036, 2038)

  87. Myth #87: The Conservation Easement Case: Aggressive Easements Are Facing Massive IRS Penalties (IRC §170(h))

  88. Myth #88: The CLAT Case: The IRS Ruled This Trust Invalid for Lacking "Economic Effect" (IRC §642(c))

  89. Myth #89: The QPRT Case: If You Die During the Term, Your Home Is Right Back in Your Estate (IRC §2036(a) (1))

  90. Myth #90: The Strangi Case: Layering FLPs and GRATs Together Can Increase Your Audit Risk (IRC §§2036, 2038, 2703, 2035)

  91. Myth #91: The Valley Park Ranch LLC v. Commissioner Case: One Bad Clause Can Sink Your Entire Conservation Deduction (Treasury Reg. §1.170A-14(g) (6) (ii))

  92. Myth #92: The Family Charitable Trust Case: Retaining Control Over Charity Powers Can Trigger Estate Inclusion (IRC §§2036, 2038, 674(b) (4))

  93. Myth #93: The Estate of Elkins Jr. Case: Don't Count on Big Valuation Discounts for Fractional Interests (IRC §2031(b))

  94. Myth #94: The Rothko Estate Case: Gallery Contracts and Misconduct Can Strip Control of Art from Heirs (IRC §2031)

  95. Myth #95: The Bacon & Rothko Estates: A Will Is Not Sufficient for Valuables Like Art (UPC §3-101, IRC §2031)

  96. Myth #96: The Reciprocal Trust Case: How Mirror SLATs Can Be a Legal Trap for Spouses (IRC §§2503, 2013, 2014)

  97. Myth #97: The SLAT Case: Distributions to a Spouse Can Be Taxed Again in Their Estate (IRC §2035, §2511)

  98. Myth #98: The Syndicated Easement Case: Aggressively Valued Easements Can Lead to IRS Penalties (IRC §170(h), §2031)

  99. Myth #99: The Estate of Littick Case: Stocks Outside a Trust Are Not Safe from Probate (IRC §2031)

  100. Myth #100: The Multi-State Property Case: Fractional Ownership Won't Save You from Multiple Probates

  101. Myth #101: The Stacked Freeze Case: Combining Complex Trusts Can Invite IRS Scrutiny (IRC §§2036, 2038, 674, 170)

31 BIG-TIME ESTATE PLANNING MISTAKES AND MYTHS COVERING:

WILLS, REVOCABLE TRUSTS, IRREVOCABLE TRUSTS, AND VARIOUS ASSETS

MYTH #71: “A revocable trust guarantees I avoid probate and estate tax.”

MYTH #71: “A revocable trust guarantees I avoid probate and estate tax.”

🔹 Issue: A revocable trust avoids probate only if funded properly, but it does not protect from estate taxes. And any retained control brings it back into your estate.

🔹 Code: IRC §2038 – If the grantor retains power to revoke, amend, or control the trust, the assets are included in their gross estate.

🔹 Doctrine: Retained powers doctrine – revocability = ownership.

🔹 Case: U.S. v. Estate of German, 7 Cl. Ct. 641 (1985) — Revocable trust assets were included in the estate for tax purposes because the decedent kept full control.

✅ Conclusion / Tip: To reduce estate tax, shift assets into irrevocable vehicles and relinquish control. For probate avoidance, make sure assets are titled in the name of the trust—not just listed.

MYTH #72: “Having a will protects my wishes and prevents conflict.”

MYTH #72: “Having a will protects my wishes and prevents conflict.”

🔹 Issue: A will is a roadmap for probate—it does not avoid it. Plus, wills are public, challengeable, and easily delayed.

🔹 Code: UPC §2-502 (will execution) and §3-102 (probate of will).

🔹 Case: In re Estate of Fick, 678 S.E.2d 46 (NC Ct. App. 2009) — Assets under the will were frozen for years due to probate litigation between heirs.

✅ Conclusion / Tip: Use a revocable funded trust to bypass probate. A will should serve only as a backup (“pour-over”) document—not the main estate tool.

MYTH #73: “Stocks transfer easily through my brokerage account.”

MYTH #73: “Stocks transfer easily through my brokerage account.”

🔹 Issue: Stocks held in individual accounts are frozen at death and must go through probate unless a transfer-on-death (TOD) or trust is used.

🔹 Code: IRC §2031 – Stocks valued at FMV as of death date.

🔹 Case: Estate of Littick v. Comm., 31 T.C. 181 (1958) – Publicly traded stocks with no TOD or trust transfer were held up in probate and valued at peak prices.

✅ Conclusion / Tip: Title stocks in a trust or designate TOD beneficiaries. Recheck your custodial account documents annually.

MYTH #74: “Crypto doesn’t need estate planning because it’s invisible.”

MYTH #74: “Crypto doesn’t need estate planning because it’s invisible.”

🔹 Issue: Crypto is taxed and included in the estate if traceable or known, and without key access, it can be lost forever.

🔹 Code: IRS Notice 2014-21 – Crypto treated as property. IRC §2031 applies at death.

🔹 Case: IRS v. Coinbase (2017) — IRS won court order forcing Coinbase to release account info of 14,000+ users.

✅ Conclusion / Tip: Keep wallets titled in entities (trusts or LLCs) and document access, cost basis, and beneficiaries. Otherwise, crypto may be unrecoverable and taxed.

MYTH #75: “Joint tenancy avoids probate. I’m covered.”

MYTH #75: “Joint tenancy avoids probate. I’m covered.”

🔹 Issue: Joint tenancy only delays probate — it doesn't eliminate it. When the second owner dies (or if both die together), probate hits hard.

🔹 Code: UPC §6-101 and IRC §2040 – Joint ownership is split unless proven otherwise; survivorship rules don’t avoid estate tax.

🔹 Case: Estate of Young v. Commissioner, T.C. Memo 2022-117 — Spouse added as joint owner days before death; IRS included 100% in estate due to lack of consideration.

✅ Conclusion / Tip: Use a trust with survivorship planning, not just joint tenancy. Without documentation and actual value transfer, the IRS assumes you still owned it all.

MYTH #76: “My out-of-state vacation home is covered by my main will.”

MYTH #76: “My out-of-state vacation home is covered by my main will.”

🔹 Issue: Real property in another state triggers ancillary probate, even with a will.

🔹 Code: State-specific probate codes (e.g., FL, CA, TX) require probate in each state real estate is located.

🔹 Case: In Estate of Braman, the decedent’s Colorado property caused a second probate in Florida, costing tens of thousands in fees.

✅ Conclusion / Tip: Move real estate into a trust or LLC and make sure it’s funded and titled properly. Otherwise, expect multiple probates — each with separate attorneys and courts.

MYTH #77: “My family partnership avoids estate tax automatically.”

MYTH #77: “My family partnership avoids estate tax automatically.”

🔹 Issue: Improperly structured Family Limited Partnerships (FLPs) get dismantled by the IRS.

🔹 Code: IRC §2704 – Valuation discounts are disallowed when control is retained or if death triggers liquidation.

🔹 Case: Estate of Strangi v. Commissioner, 417 F.3d 468 — IRS disallowed valuation discounts due to retained control.

✅ Conclusion / Tip: Hire third-party managers, execute operating agreements at arms-length, and document real business purposes. Don’t use FLPs as a placeholder or shell.

MYTH #78: “My business real estate is protected because it's in an LLC.”

MYTH #78: “My business real estate is protected because it's in an LLC.”

🔹 Issue: If the LLC is owned by the deceased personally, the interest goes through probate.

🔹 Code: IRC §2031 – FMV inclusion; UPC §2-101 – probate applies unless non-probate transfer exists.

🔹 Case: Estate of Giustina v. Commissioner, T.C. Memo 2011-141 — IRS applied FMV to timberland LLC; no discounts due to lack of planning.

✅ Conclusion / Tip: Transfer LLC membership to a trust while alive. Otherwise, death triggers valuation disputes, probate, and IRS involvement

MYTH #79: “I transferred shares to my kids — no tax due.”

MYTH #79: “I transferred shares to my kids — no tax due.”

🔹 Issue: Without a timely filed Form 709 (gift tax return), the transfer is considered incomplete.

🔹 Code: IRC §2511 – Gifts must be documented and reported.

🔹 Case: Giselman v. Comm., T.C. Memo 1997-211 — IRS clawed business interests back into estate due to lack of gift documentation.

✅ Conclusion / Tip: Every gift of business interests must be appraised and filed. No paperwork = no gift in the eyes of the IRS.

MYTH #80: “My child is my successor. It’s common sense.”

MYTH #80: “My child is my successor. It’s common sense.”

🔹 Issue: Courts don’t honor “common sense.” They honor documents. If no succession plan exists, your child has no legal right to step in.

🔹 Code: Corporate and LLC statutes require proper resolutions and transfer instruments.

🔹 Case: In re Estate of Thompson, business halted for 18 months as siblings fought over succession. The court froze the entity due to lack of documents.

✅ Conclusion / Tip: Spell it out in an operating agreement or successor trustee plan. Without it, your business becomes a courtroom battlefield.

MYTH #81: “I filed a will. That’s enough.” *****

MYTH #81: “I filed a will. That’s enough.”

🔹 Issue: A will does nothing unless assets are titled correctly. It only controls probate property.

🔹 Code: UPC §3-101 – Will controls what's in the decedent’s name alone.

🔹 Case: In re Estate of Fick, 678 S.E.2d 46 — Despite a will, assets were delayed due to title mismatches and no trust funding.

✅ Conclusion / Tip: Think title first. The best-written will can’t move assets that were never aligned.

MYTH #82: “My stock portfolio will pass through my estate.”

MYTH #82: “My stock portfolio will pass through my estate.”

🔹 Issue: If no TOD or trust exists, brokerage accounts are frozen.

🔹 Code: IRC §2031 – Valuation of marketable securities.

🔹 Case: Estate of Littick, 31 T.C. 181 — IRS taxed peak valuation because of probate delay.

✅ Conclusion / Tip: Use TOD (transfer on death) registrations or trusts. Always keep updated beneficiary designations on file.

MYTH #83: “My IP (copyright, trademark, patent) will pass to my heirs.”

MYTH #83: “My IP (copyright, trademark, patent) will pass to my heirs.”

🔹 Issue: Intellectual property is part of your estate and requires specific assignments or trusts.

🔹 Code: IRC §2033 – All rights, tangible and intangible, are included.

🔹 Case: Estate of Steinberg – Unassigned licensing rights created a valuation dispute and led to probate hold.

✅ Conclusion / Tip: Assign IP to an entity (LLC or trust). Without this, your brand, book, software, or patent may be frozen or taxed at full FMV.

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