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Who should prevail

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Reference no: EM131760524

Research Problem. Grace Lang was employed as a waitress at the Pancake House in Grand Bay, Alabama. While working the morning shift on March 7, 2009, one of Grace's customers left her a Florida lottery ticket as a tip. When Grace discovered that the ticket had won part of the Florida Lotto jackpot, the following steps were taken.

Upon advice of her father and legal counsel, the Lang Corporation was formed and immediately mad an S election.

Grace received 49% of the stock in Lang, and 51% balance was distributed to family members.

Grace had the Florida gaming authorities designate the Lang Corporation as the recipient of the prize money-approximately $10 million payable over 30 Years.

Grace's coworkers at the Pancake house filed suite against Grace based on an agreement they had to share any lottery winnings equally. The Alabama courts eventually decided that such an agreement did exist but that it was not enforceable. (Alabama law does not permit enforcement of contracts involving illegal activities-gambling is illegal in Alabama).

In 2017, the IRS determined that Grace had made taxable gifts in 2009 when she shifted some of the Lottery winnings to family members. She made the gifts by having 51% of the Lang Corporation stock issued to them. (As Lang is an S corporation, the lottery income passes through the shareholders.)

Grace disputed the gift tax assessment by contending that her action were required by the Lang family agreement. Under this agreement, it was understood that each member would take care of the others in the event he or she came into a "substantial amount" of money. Because Grace was bound by the Lang family agreement, she was compelled to relinquish and right to 51% of the Lang stock. Thus, the satisfaction of an obligation is not a gift. As no gift occurred, the imposition of the gift tax is not appropriate.
Who should prevail?

Partial list of research aids:
Estate of Emerson Winkler, 36 TCM 1657, T.C. Memo. 1997-4.
Tonda Lynn Dickerson, 103 TCM 1280, T.C. Memo. 2012-60

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This involves solving a legal case study on Gift tax in United States. A woman wins lottery money. She shares the money with her family members by forming a corporation. The IRS (Internal Revenue Service) raise gift tax liability on the woman. The case answers whose side is likely to prevail in court.

Reference no: EM131760524

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Reviews

inf1760524

6/13/2018 5:38:13 AM

Thanks for Completing my paper in as per the requirements. Specially thanks for the references that were more important for me. He was excellent! I would recommend him.

len1760524

12/11/2017 6:19:41 AM

I have to have tax code references and cases that support the paper. With a conclusion of the paper Upon advice of her father and legal counsel, the Lang Corporation was formed and immediately mad an S election.

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