Internal Revenue Bulletin:  2008-16 

April 21, 2008 

ESTATE TAX


Table of Contents

Rev. Rul. 2008-22 Rev. Rul. 2008-22

Substitution power. This ruling provides guidance regarding whether the corpus of an inter vivos trust is includible in the grantor’s gross estate under section 2036 or 2038 of the Code if the grantor retained the power, exercisable in a nonfiduciary capacity, to acquire property held in the trust by substituting other property of equivalent value. The ruling provides that, for estate tax purposes, the substitution power will not, by itself, cause the value of the trust corpus to be includible in the grantor’s gross estate, provided the trustee has a fiduciary obligation (under local law) to ensure the grantor’s compliance with the terms of this power by satisfying itself that the properties acquired and substituted by the grantor are in fact of equivalent value and further provided that the substitution power cannot be exercised in a manner that can shift benefits among the trust beneficiaries.


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