Estate of Kalikow v. Comm’r, T.C. Memo. 2023-21 | February 27, 2023 | Thornton, J. | Dkt. No. 14436-10.
Summary: Pearl B. Kalikow’s (“Pearl”) husband died in 1990. On January 4, 2006, Pearl passed away. The SK Trust (“Trust”) was created with the remainder of Pearl’s husband’s estate. On Pearl’s husband will it was instructed to the trustees of the Trust to pay the trust’s net income to Pearl during her lifetime. After Pearl passed away the Trust assets were paid over to trusts for the benefit of her children Edward Kalikow (“E. Kalikow”) and Lauren Platt (“Platt”).
Mr. Shalik and Mr. DeVita executors of Pearl’s husband’s estate, elected to treat the Trust as a QTIP trust under § 2056(b)(7). The Trust property was included in Pearl’s gross estate at its fair market value as of the date of her death. E. Kalikow and Platt created a Kalikow Family Partnership, L.P. (“KFLP”). The Trust transferred the property to KFLP in exchange of 98.5% partnership interest. The Trust property consisted of the 98.5% partnership interest, cash, and marketable securities. The trustees of the Trust were E. Kalikow, Mr. Shalik and Patt. After the payment of certain expenses, the remainder of Pearl’s estate was bequeathed to a charitable organization.
From a dispute between Mr. Shalik and E. Kalikow and Patt over the Trust distribution, it was agreed that the Trust would pay a settlement payment for undistributed income (2002-2005), including certain commissions, accounting fees, and legal fees. The IRS issued a Notice of Deficiency determining the value of the Trust limited partnership interest is lower than the amount reported on Form 706. The IRS reduced the Schedule F assets by the value of the estate’s pending claim against the Trust. E. Kalikow and Patt on the Cross-Motion for Partial Summary Judgment established that the value of the Trust assets included in the estate were properly reduced by the undistributed income amount under the Settlement pursuant to § 2044 and various items of the Settlement payment are deductible from the gross estate as administration expenses under § 2053.