[WSBAPT] Substitution of Intentionally Defective Grantor Trust Assets with cash

[Frank Hui]

Listmates

An Intentionally Defective Grantor Trust (IDGT) is frequently created using
IRC §675(4)(C), which allows the Grantor to substitute assets with other
assets of equivalent value.



Recently, I have approached a brokerage company (Vanguard) requesting to
substitute cash in the Grantor’s personal brokerage count for some highly
appreciated stocks in the brokerage account of his IDGT. The purpose was to
transfer the appreciated assets back to the elderly grantor so as to get
step-up basis at the grantor’s death. To my surprise, I was told that the
company will treat the transection as a disposition of property and will
issue a 1099-B at the end of the year. This will potentially defeat the
purpose of the whole exercise.



I wonder if anybody who have undergone the type of transfer as described
above can tell me the actual mechanism of the transfer, including
instructions to the brokerage companies and the paperwork that they should
correctly keep as well as issue for tax reporting purposes?



Thank you in advance for the assistance.

-- 
Best regards,

Frank C. Hui, MD, JD, LLM (Taxation)
Fhui.law at gmail.com
Phone: 425-242-1574
www.FrankHuiLaw.com

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