Estate of Virginia Kite v. Commissioner of Internal Revenue (U.S. Tax Court)

Several issues were discussed in this decision including a determination of whether the sale of Mrs. Kite’s own interest in Kite Family Investment Company in 2001 to her children or their trusts for three private annuity agreements due in 2011 was a disguised gift subject to gift tax or if it was a bona fide sale with adequate and full consideration.  The Court agreed that such sale of her interest constituted a sale as the annuity agreement between Mrs. Kite and her children were enforceable and the parties demonstrated an intention to comply to the annuity agreement.  Mrs. Kite also demonstrated an expectation that she would receive payments through her active participation in her finances as well as her history as an acute business woman.  Mrs. Kite had maintained sufficient assets for her lifestyle in other forms aside from KIC and as such, made her interest in KIC dispensable and available for a potentially risky investment in an annuity.

LINK TO DECISION