8879. How can the existence of voting stock create adverse estate tax consequences in the context of a transfer of stock in a controlled corporation?Alexis Longrcline202015-07-30T16:13:00Z2015-07-30T16:13:00Z12981700Summit Business Media1431995148879. How can the existence of voting stock create adverse estate tax consequences in the context of a transfer of stock in a controlled corporation?When a taxpayer transfers property in which he or she retains certain rights, the value of that property will be included in his or her estate for estate tax purposes.. IRC Sec. 2036(a). IRC Section 2036 specifically provides that retaining the right to vote shares in certain corporations constitutes a right that will generate estate tax inclusion even if the shares themselves are actually transferred. This is the case whether the right to vote is retained directly or indirectly (such as through the use of a trust entity or informal agreement)..IRC Sec. 2036(b).In order for the value of transferred voting stock to be included in the original shareholder’s estate, the corporation must be considered a “controlled corporation.” A corporation is a controlled corporation if, at any time after the transfer and during the three-year period ending on the date of the decedent’s death, the decedent-transferor owned at least 20 percent of the combined voting power of all classes of the corporation’s stock. In determining the 20 percent ownership test, the family attribution rules of IRC Section 318 apply..IRC Sec. 2036(b)(2).As a result, the transferring owner will be treated as though he or she owns (1) any stock owned (either directly or indirectly) by his or her spouse, children, grandchildren or parents, (2) a proportionate share of any stock owned by a partnership or estate in which the transferor is either a partner or beneficiary, (3) a proportionate share of any stock owned by a trust of which he or she is a beneficiary or grantor and (4) stock owned by a corporation if he or she owns 50 percent or more of the value of that corporation. These broad attribution rules expand the reach of IRC Section 2036, making the transfer of nonvoting stock the most effective way to avoid the risk that the value of the shares will eventually be included in the transferor’s estate.