“Recent Developments 2025” was presented by Turney Berry, Sam Donaldson, and Carlyn McCaffrey, with materials by Steve Akers, Turney Berry, Sam Donaldson, Steve Murphy, Jeff Pennell, Clary Redd, Bill Sanderson, and Howard Zaritsky. All the speakers and writers belong to ACTEC. I have not seen the materials, but I know that they were extensive, based on what I have seen of their past current developments work.
The summary is excellent, so I hope you read it “cover-to-cover.”
The Sections 67 and 68 summary included a comment, “The wealthy taxpayer can avoid the issue by using a family investment company with a C-corp as a general partner that can take the investment deductions.” The 2025 law the reporter referred to as OB3 made it even more important for partnerships along these lines to subject the family office to very significant entrepreneurial risk, which my business structuring materials describe in part II.C.8.a. Code § 707 - Compensating a Partner for Services Performed. That risk component makes this tool much more complicated that one might otherwise have thought – more complex than the profits interest involved in Lender Management, LLC v. Commissioner, T.C. Memo. 2017-246.
That same portion of the remarks discussed the 2/37 haircut imposed on deductions that trusts take. The literal language would create double taxation of trusts – please read Carlyn’s comments and solutions. We don’t know whether IRS and Treasury will provide relief from this burden. I led a task force (to which Carlyn contributed significantly) that generated ACTEC Comments on The One Big Beautiful Bill Act to Congressional Committees and ACTEC Comments on The One Big Beautiful Bill Act to the US Treasury, which were identical letters written to different groups. Also included in those comments are a description of changes to IRC § 1202, which have many more nuances than indicated in the summary (there is only so much a summary can say).
The McDougall summary includes some very important points. I strongly agree with including an independent trustee who can make distributions without limitation, while at the same exercising extreme caution about who would serve. My business structuring materials discuss these issues from various angles in part II.J.18. Trust Divisions, Mergers, and Commutations; Decanting, culminating in the highly relevant subpart II.J.18.f. Commutation vs Mere Division.
My comment on Elcan: if the grantor borrows from a GRAT to freeze the GRAT’s value after successful investing, the grantor should repay the note, then later pay the GRAT pays the annuity, rather than the GRAT using the note to pay the annuity. The IRS’ argument was weak, so hopefully it will lose that case, and we might not need to change our GRAT administration after all.
My comment on GST Developments PLRs 202507005 and 202531005: don’t include a contingent general power of appointment in an irrevocable inter vivos trust. In my business structuring materials, see part III.B.1.d.ii. Estate Tax Inclusion Period (ETIP).
Again, I encourage you study the reporters’ work carefully, because they mention a lot of great points on which I did not comment above.
Steve
