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<p class="MsoNormal"><a name="_MailEndCompose"><span style="font-size:11.0pt;font-family:"Calibri","sans-serif";color:#1F497D">Additional observation – Even if the beneficiaries were treated as owners under section 678 on account of their withdrawal rights,
they should not be treated as owners of any portion added to the trust at the end of a GRAT unless the trust purchased the GRAT remainders. As to those additions, they never had any withdrawal rights.<o:p></o:p></span></a></p>
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<p class="MsoNormal"><b><span style="font-size:10.0pt;font-family:"Arial","sans-serif";color:black">Carlyn McCaffrey
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<p class="MsoNormal"><b><span style="font-size:9.0pt;font-family:"Arial","sans-serif";color:#016089">McDermott Will & Emery LLP</span></b><span style="color:#1F497D"> </span><span style="font-size:7.5pt;color:#B9B9B9"> |
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<p class="MsoNormal"><a href="http://www.mwe.com/Carlyn-S-McCaffrey/"><b><span style="font-size:8.0pt;font-family:"Calibri","sans-serif";color:#016089">Biography</span></b></a><b><span style="font-size:8.0pt;font-family:"Calibri","sans-serif";color:#016089"> </span></b><b><span style="font-size:7.5pt;font-family:"Calibri","sans-serif";color:#016089">|</span></b><b><span style="font-size:8.0pt;font-family:"Calibri","sans-serif";color:#016089"> </span></b><a href="http://www.mwe.com"><b><span style="font-size:8.0pt;font-family:"Calibri","sans-serif";color:#016089">Website</span></b></a><b><span style="font-size:8.0pt;font-family:"Calibri","sans-serif";color:#016089"> </span></b><b><span style="font-size:7.5pt;font-family:"Calibri","sans-serif";color:#016089">|</span></b><b><span style="font-size:8.0pt;font-family:"Calibri","sans-serif";color:#016089"> </span></b><a href="http://www.dynasend.com/signatures/vcard/cmccaffrey-at-mwe.com.vcf"><b><span style="font-size:8.0pt;font-family:"Calibri","sans-serif";color:#016089">vCard</span></b></a><b><span style="font-size:8.0pt;font-family:"Calibri","sans-serif";color:#016089"> </span></b><b><span style="font-size:7.5pt;font-family:"Calibri","sans-serif";color:#016089">|</span></b><b><span style="font-size:8.0pt;font-family:"Calibri","sans-serif";color:#016089"> </span></b><a href="mailto:cmccaffrey@mwe.com"><b><span style="font-size:8.0pt;font-family:"Calibri","sans-serif";color:#016089">Email</span></b></a><b><span style="font-size:8.0pt;font-family:"Calibri","sans-serif";color:#016089"> </span></b><b><span style="font-size:7.5pt;font-family:"Calibri","sans-serif";color:#016089">|</span></b><b><span style="font-size:8.0pt;font-family:"Calibri","sans-serif";color:#016089"> </span></b><a href="https://www.twitter.com/McDermottLaw"><b><span style="font-size:8.0pt;font-family:"Calibri","sans-serif";color:#016089">Twitter</span></b></a><b><span style="font-size:8.0pt;font-family:"Calibri","sans-serif";color:#016089"> </span></b><b><span style="font-size:7.5pt;font-family:"Calibri","sans-serif";color:#016089">|</span></b><b><span style="font-size:8.0pt;font-family:"Calibri","sans-serif";color:#016089"> </span></b><a href="http://www.linkedin.com/company/mcdermott-will-&-emery"><b><span style="font-size:8.0pt;font-family:"Calibri","sans-serif";color:#016089">LinkedIn</span></b></a><b><span style="font-size:8.0pt;font-family:"Calibri","sans-serif";color:#016089"> </span></b><b><span style="font-size:7.5pt;font-family:"Calibri","sans-serif";color:#016089">|</span></b><b><span style="font-size:8.0pt;font-family:"Calibri","sans-serif";color:#016089"> </span></b><a href="http://www.mwe.com/info/news/blogs.html"><b><span style="font-size:8.0pt;font-family:"Calibri","sans-serif";color:#016089">Blog</span></b></a><span style="color:#1F497D"><o:p></o:p></span></p>
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<p class="MsoNormal"><b><span style="font-size:10.0pt;font-family:"Tahoma","sans-serif"">From:</span></b><span style="font-size:10.0pt;font-family:"Tahoma","sans-serif""> estgift-bounces@actec.org [mailto:estgift-bounces@actec.org]
<b>On Behalf Of </b>Jonathan Blattmachr<br>
<b>Sent:</b> Wednesday, May 30, 2018 3:40 PM<br>
<b>To:</b> David L. Case; EstGift@actec.org<br>
<b>Subject:</b> Re: [EstGift] IRC 678 vs. IRC 675/677<o:p></o:p></span></p>
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<p><span style="color:black">The statute expressly provides that normal grantor trust rules trump 678. When the original grantor trust status ends, whether 678 can then be triggered, please see the article entitled "Decoding Section 678" by Mitchell Gans,
Alvina Lo and me in ACTEC Journal, Vol. 35, No. 2, Fall 2009. Jonathan<o:p></o:p></span></p>
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<p class="MsoNormal"><b><span style="font-size:11.0pt;font-family:"Calibri","sans-serif";color:black">From:</span></b><span style="font-size:11.0pt;font-family:"Calibri","sans-serif";color:black">
<a href="mailto:estgift-bounces@actec.org">estgift-bounces@actec.org</a> <<a href="mailto:estgift-bounces@actec.org">estgift-bounces@actec.org</a>> on behalf of David L. Case <<a href="mailto:dlc@tblaw.com">dlc@tblaw.com</a>><br>
<b>Sent:</b> Wednesday, May 30, 2018 3:20 PM<br>
<b>To:</b> <a href="mailto:EstGift@actec.org">EstGift@actec.org</a><br>
<b>Subject:</b> [EstGift] [filtered] IRC 678 vs. IRC 675/677</span><span style="color:black">
<o:p></o:p></span></p>
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<p class="xmsonormal"><span style="color:black">Dear Fellows.<o:p></o:p></span></p>
<p class="xmsonormal"><span style="color:black">Question on income taxation of ILIT with additional funding:
<o:p></o:p></span></p>
<p class="xmsonormal"><span style="color:black">As typical, ILIT allows Trustee to pay premiums with income (IRC 677(a)(3) applies), and has substitution of assets power for Trustor (IRC 675(4)(C) applies), and thus would have grantor trust status. ILIT also
has typical Crummey powers (IRC 678 issue). Though recent PLRs indicate that grantor trust status controls over IRC 678, and consensus seems to be that is a correct result, is there any more definitive current authority that beneficiaries who have lapsed
withdrawal powers are not taxed on income? Issue is more critical here due to substantial additional funding of ILITs through receipt of residuary GRAT distributions, possible substantial dividends and capital gain in ILIT.<o:p></o:p></span></p>
<p class="xmsonormal"><span style="color:black">Thanks.<o:p></o:p></span></p>
<p class="xmsonormal"><span style="color:black"> <o:p></o:p></span></p>
<p class="xmsonormal"><span style="color:#1F497D"><img border="0" width="280" height="53" id="x_Picture_x0020_46" src="cid:image003.jpg@01D3F810.93785B60" alt="tblogo"></span><span style="color:black"><o:p></o:p></span></p>
<p class="xmsonormal"><span style="font-family:"Arial","sans-serif";color:#3B3838">David L. Case | Shareholder | 602.255.6097</span><span style="color:black"><o:p></o:p></span></p>
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