GRAT and Valuation Planning After CCA 202152018: What Practitioners Need to Know


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CCA 202152018, released on December 30, 2021 has critical impact on grantor retained annuity trusts (GRATs). The CCA addresses a common valuation challenge: what consideration should be given to a potential sale in valuing an asset? Often there is a long continuum from: no sale, to discussions with potential buyers, to a letter of intent, to a binding contract, etc.

Where the business is on this continuum will affect how an appraiser evaluates the possible implications of the potential sale. In the recent CCA, the possible sale had moved too far along the continuum towards an actual sale to have been ignored in the valuation (by use of a stale appraisal). As a result, the IRS extended the reasoning in the infamous Atkinson v. Commissioner, 115 T.C. 26, 32 (2000), aff’d, 309 F.3d 1290 (11th Cir. 2002) and held that the valuation was so wrong that the GRAT annuity was not a qualified annuity interest under Code Section 2702, resulting in a deemed gift of the entire value of the property involved.

What does this CCA mean to GRAT planning generally? What might this mean to the use of GRATs as valuation spillover receptacles in a defined value mechanism? Might this have implications on other aspects of defined value techniques? What might this CCA mean to valuations generally? Are there new steps and precautions practitioners might choose to take? Might this signal a broader application of the Atkinson principles to GRATs, CRTs, CLTs and perhaps any valuation generally, even applying those principles to impose valuation penalties?

This program will address all of these questions and include a detailed discussion of the CCA, analysis by an expert appraiser of the valuation implications, a discussion of Atkinson, and much more.

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