Cases Involving NBA Owner's Estate May Mark Decline of Tool

A self-cancelling installment note is one tool in an estate planner's tool box, but recent cases such as Estate of Davidson v. Commissioner and Aaron v. Deloitte Tax LLP may mark the decline of this particular tool. Private Wealth Service Attorneys Ed Koren and David Scott Sloan note that these cases should remind practitioners that the risks of the self-cancelling installment note should be fully disclosed to clients.

"Whether a client is utilizing a SCIN or any other intra-family sale involving a debt instrument, it is critical that there is a qualified appraisal of the interest being sold and that the entity issuing the debt is economically viable," said Mr. Sloan.

Mr. Koren said that moving forward, practitioners have "“got to be careful and certainly need to advise the client that this is something that is likely to be scrutinized by the IRS.”

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