Gifts in Contemplation of Death: Why Can't Section 2035 Simply Die?

Income and wealth inequality has become a popular topic. There are a myriad of ways to reduce such inequality utilizing the tax system, either the income tax or the transfer taxes. Revitalizing the estate tax by reducing the exemption amount and adjusting the rate structure would reduce inequality. Much has been written about the viability of the estate tax and possible alternatives. This article does not revisit that analysis. Instead, it assumes that the estate tax will remain a viable component of the overall tax system. It analyzes one small segment of the estate tax – §2035 – and argues that repeal would simplify the estate tax without reducing revenues. Commentators have advocated for integration and simplification of the gift and estate tax provisions governing retained interests for over 70 years, but §2035 has received relatively little attention.