Does a Personal Guarantee for the loan made to the Irrevocable Grantor Trust constitute a completed gift?
A. No. In Bradford vs. Commissioner, 34 T.C. 1059 (1960), the Tax Court ruled that an agreement to guarantee the payments of another’s debt did not constitute a completed gift because there was no certainty that payment on the guarantee would be required. However, the IRS position in Letter Ruling 9113009 was when a person agrees to guarantee the payment of another debts, the guarantor transfers a valuable property interest, which is deemed a complete gift on the date the premise is binding and determinable in value. The IRS relied on the 1984 Supreme court’s decision in Esther Dickman vs. Commissioner, No. 82-1-41, 2/22/84 where the Court ruled that an interest-free loan of funds constituted a valuable right. The use of the funds interest-free was a right having significant value and there for subject to federal gift tax. The IRS applied the same theory from Dickman in Letter Ruling 9113009 and held that the guarantee was a valuable property interest and therefore should also be subje
