WILL UNAMBIGUOUS DIRECTIONS IN A LAST WILL AVOID ALL DISPUTES OVER BURIAL INSTRUCTIONS?

Last week the Florida court spectacle of where the bodily remains of Anna Nicole Smith should be laid to rest dominated the airwaves and newspapers. This high profile case begs the question whether the court hearing could have been avoided if Anna Nicole Smith had clearly and uniquivocally given burial instructions in her Last Will.

In Florida, the answer appears to be no. The leading Florida case on the issue is Cohen v. Guardianship of Cohen, 896 So.2d 950 (Fla. 4th DCA 2005). Several principles relating to burial/disposition of bodily remains instructions can be gleaned from the case.

First, in the absence of a testamentary disposition in the Last Will, the spouse of the deceased or the next of kin has the right to the possession of a body for burial or other lawful disposition. Thus, where such relatives exist, their desires take precedence over the desire of the appointed Personal Representative/Executor.

Second, when the decedent has expressed his intention as to the disposition of bodily remains in the Last Will, the court should generally follow this expressed intent.

Lastly, however, the court is not uniquivocally bound by the Last Will. If a contrary intent of the deceased can be shown by clear and convincing evidence, the court can overide the intent as expressed in the Last Will. Therefore, even if Anna Nicole Smith's Last Will was very clear on her desires, the court was still obligated to consider and weigh any evidence that indicated a change of intent by Ms. Smith.

Of course, a testator with desires on the subject should place his intent in his Last Will, since the burden will be on others to show a later change in intent to overide these wishes. When there are concerns about relatives seeking to override his or her intent, additional or periodic ratifications of such intent may also be helpful.

INSTALLMENT SALES OF PARTNERSHIP INTERESTS

When a seller of property receives payments in more than one year, the seller may be eligible to report any gain arising on the sale using the installment method of accounting under Code Section 453. This allows a portion of the gain to be allocated to multiple tax years, as payments are received in those years.

The application of Code Section 453 to an installment sale of a partnership interest (or aninterest in a limited liability company taxable as a partnership) raises numerous issues, not all of which have been fully resolved. Richard Harris, in an article in Business Entities journal entitled Installment Sales of a Partnership Interest, discusses several of these issues which practitioners need to be concerned about.

The first issue he discusses is the potential disallowance of installment sale treatment to the portion of partnership/LLC assets made up of "hot assets" under Code Section 751 – namely, unrealized receivables and inventory items. Mr. Harris notes that Rev. Rul. 89-108 disallows these items. However, he notes that not everyone agrees that the ruling is a correct interpretation of the law, and that it did not directly apply to unrealized receivables and to all inventory (since at the time, Section 751 only applied to substantially appreciated inventory) so perhaps it does not provide precedent for those items.

The other principal issues discussed by Mr. Harris relate to the effect that partnership liabilities will have on installment sale treatment. He notes that a partnership's qualifying liabilities under Section 453 may affect the partner's computation of installment sale gain by reducing the contract price. Further, the partnership's liabilities may also be treated at times as payment received in the initial year of sale, thus accelerating the gain recognition.

Harris, Richard, Installment Sales of a Partnership Interest, Business Entities, Jan/Feb 2007.

TOURNAMENT POKER IS NOT A PROFESSIONAL SPORT

In flipping through your cable TV channels, no doubt you have noticed on many of the sports channels more and more coverage of tournament poker. Tournament poker is a hosted poker event that can last from days to weeks. Unlike a regular poker game, a participant cannot exit the game and cash out his chips at will – instead, one plays until he or she loses or is the sole remaining player. To play, a participant pays an entrance fee, which is used to pay administrative expenses and create a prize pot. Prizes are divided among the last players to be eliminated, with more money being paid to those that last the longest.

Internal Revenue Code Section 165(d) provides that wagering losses can be deducted in a year only to the extent of wagering winnings. Professional gamblers can report their wagering income and expenses on Schedule C. Nonprofessionals must report all of their gambling winnings and report their losses as itemized deductions.

In 2000, Gloria Tschetschot had winnings of $11,000 from playing in poker tournaments. Unfortunately, she had also losses from tournament play of $29,993. To try and get around the wagering loss limits of Section 165(d), which would have limited her loss deductions to the $11,000 in winnings, Gloria claimed that tournament poker is more akin to a professional sport like tennis instead of a wagering activity. The IRS disagreed and the issue ended up in Tax Court.

The Tax Court noted that regular poker is a wagering activity. It further noted that simply because a sport or activity is played or conducted in a tournament setting does not transform the underlying activity into something different. Tournament poker play, much like live-action poker, necessitates the use of the word "bet" or "wager." The players are still placing bets, hoping to win.

In distinguishing the treatment of tournament golf or tennis players from tournament poker players, the Tax Court simply noted that Congress had decided to treat wagering activities different from other sporting activities, and it would respect that treatment.

Thus, Gloria's tournament poker play was held to be a wagering activity, subject to the loss limitation provisions of Section 165(d).

Tschetschot, et ux., TC Memo 2007-38 (February 20, 2007)