At Deener, Hirsch & Shramenko, P.C., a boutique law firm, we provide our clients with highly-specialized expertise in the intricate and dynamic fields of income tax, estate and gift tax and business planning, as well as estate, tax, and probate litigation, all while maintaining a close, personal client-attorney relationship.

BRIEF HISTORY.

Deener, Hirsch & Shramenko, P.C. was founded in 1980 by Jerome A. Deener, who began his tax career as a Senior Tax Accountant with a “Big 8” accounting firm, before beginning the practice of tax law. In 1990, Debra T. Hirsch joined the Firm as an estate planner and became a partner in 2003. To service the litigation needs of the firm’s clients, Andre Shramenko joined the firm in 2003 and became a partner in 2006. The Firm has established a reputation for excellence as it continues to expand in the areas of trusts and estates, tax and business succession planning, transactional, IRS, and probate litigation matters.

PROFESSIONAL EXPERTISE.

Senior tax professional members have attained or participated in advanced law degree programs known as LL.M. degrees in Taxation. In the evolving field of taxation and estate planning, and as well as in tax litigation, constant attention to change and detail is required. Our specialized focus and expertise in the field provides firm clients with the utmost in high quality, professional, legal counsel on a cost-effective basis. Members of the firm, including its senior partner, Jerome Deener, have extensive experience in tax controversy matters, including litigation before the United States Tax Court and client presentation before the IRS at all levels. The firm has obtained national recognition as a result of the favorable results in Tax Court litigation matters dealing with family partnerships, sales of partnership and business interests to trusts, private annuity transactions, self-canceling installment note transactions, and other sophisticated planning techniques.

The firm provides estate tax planning and estate administration services, including design and preparation of sophisticated estate planning transactions. The Firm’s estate planning services include preparation of sophisticated wills, trusts, powers of attorney, partnerships and limited liability companies, charitable trusts, and other legal documents designed to accommodate client objectives while employing the latest planning techniques. The firm also prepares gift and estate tax returns to report these complex transactions on behalf of the client, when appropriate. Jerome A. Deener, the firm's Senior Partner, chairs the firm's estate planning and estate administration group.

LEADERS IN EDUCATION.

In the dynamic and evolving field of tax law and estate planning, Deener, Hirsch & Shramenko, P.C. prides itself on being current on the newest tax developments. Our attorneys conduct legal education seminars, and monthly continuing education seminars for Certified Public Accountants, attorneys and other professional and lay groups. Through our commitment to education, the firm practices at the forefront of innovations in tax and estate planning law and maintains the highest degree of professional expertise.

Our attorneys have authored numerous articles on tax and business-related subjects for publication in professional journals. Mr. Deener has authored the first, second and third editions to Estate Planning Strategist (http://www.njicle.com/product.aspx?pid=185), a treatise published by the New Jersey Institute for Continuing Legal Education for attorneys and accountants on the subject of sophisticated tax and estate planning topics, including recommended forms that are made available to members of the New Jersey Bar Association. Through their publications in distinguished journals for tax professionals, our attorneys maintain their positions as leading experts in tax law and continue to educate other professionals in the newest tax laws and planning techniques.

PERSONAL TOUCH.

Our firm has distinguished us from other law firms through our ability to communicate our knowledge and expertise of this complex field of law to our clients, in a concise and comprehensible manner. At Deener, Hirsch & Shramenko, we pride ourselves on the friendly, intimate atmosphere that characterizes our firm. Our attorneys are committed to providing highly personalized, sophisticated, responsive service, while being sensitive to our clients' needs. Clients of Deener, Hirsch & Shramenko receive the best of both worlds: small firm personal attention coupled with sophisticated legal expertise.

NOTABLE ACHIEVEMENTS

A. Estate and Gift Tax Matters

1. United States Tax Court – Hackl-Stewart: Sale of Limited Partnership units to a trust, resulting in a refund to taxpayers of $15,000, after the Internal Revenue Service asserted a $1,750,000 tax deficiency.

In this litigation, the decedent and her two adult children formed a family limited partnership prior to the decedent’s death. The decedent sold her partnership interests to a trust for the benefit of her grandchildren. The sale was for a private annuity based upon decedent’s actuarial life expectancy.

The Internal Revenue Service initially claimed that the partnership itself was a sham, and the sale was a sham, and sought to impose both a gift tax and an estate tax on the value of the underlining assets represented by the partnership units sold. The total tax asserted by the Internal Revenue Service was $1,750,000.

The firm was successful in convincing Counsel to the Internal Revenue Service that the partnership was a bona fide partnership, its operations were conducted in a business-like manner, and the sale transaction for a private annuity was, in fact, recognized as a bona fide tax saving technique.

The firm’s technical expertise in connection with this litigation resulted in the entire $1,750,000 tax being abated, and resulted in a $15,000 refund.

2. United States Tax Court – Karmazin: Sale of Limited Partnership Units to a Grantor Trust Favorably Resolved in Taxpayer’s Favor.

In 1999, our client placed $5,000,000 of marketable securities into a family limited partnership we developed on her behalf. Our client retained control as a General Partner. A majority of limited partnership units were issued to her. She sold the majority of limited partnership units to a trust for her children at a purchase price discounted by 40%, pursuant to an appraisal of the limited partnership units. Over $2,000,000 of equity eventually passed to the beneficiaries of the trust.

The Internal Revenue Service claimed that our client made a gift to the trust of $5,000,000 claiming that: (a) the partnership had no real substance, (b) the sale was in reality a gift, and (c) the transaction resulted in a $2,500,000 gift tax.

We filed a Petition to the United States Tax Court on behalf of our client. We demonstrated the validity of the transaction, the legal precedent that supported the transaction, and were able to show the Internal Revenue Service that the terms of the partnership agreement, sale agreement and trust provisions were followed meticulously. The case was settled with the Internal Revenue Service. The sale, the partnership and the trust were all respected. To settle the case, the 40% discount was reduced to 37% (thereby reducing over 90% of the gift tax asserted.).

The benefit of the plan is that, should the partnership assets double in value, over $7,000,000 can eventually pass to the trust for our client’s children without further gift tax, estate tax, income tax or generation skip tax.

This planning program has been used by many other estate planning professionals throughout the country. The case was favorably noted in many professional magazines and discussed at professional seminars throughout the country.

3. United States Tax Court – Kohlsaat: Donee's Failure to Exercise Withdrawal Rights in Trust Did Not Destroy “Crummey” Power Present Interest:

The firm was engaged as special counsel in a 1997 Tax Court decision (Kohlsaat v. Commissioner). In this case, the Internal Revenue Service attempted to deny the $10,000 annual gift tax exclusion treatment to a grantor of a trust where the beneficiaries of the trust were given notices of the right to withdraw, but failed to exercise the right. The Internal Revenue Service claimed that an implicit understanding existed not to withdraw, and thereby denied annual exclusion treatment.

The firm was instrumental in persuading the Tax Court to find, absent affirmative facts to the contrary, no implied agreement among the donor and beneficiaries restricting withdrawals from the trust. Accordingly, the beneficiaries of the trust were held to possess present interests, resulting in favorable annual exclusion treatment.

The case resulted in national attention for our firm in view of the important precedent established for life insurance trusts and similar trusts. Under such arrangements, a donor will advance funds to a trust giving the beneficiaries the right to withdraw the funds for a stated period of time. If the funds are not withdrawn, the proceeds remaining in the trust would be used for payment of life insurance premiums on policies held by the trust.

The case preserved the annual exclusion for funds advanced to a trust, even if all beneficiaries do not exercise their rights to withdraw their funds from the trust. This favorable result will occur, provided no actual agreement can be found among the grantor and the beneficiaries.

4. National Office of Internal Revenue Service Letter Ruling – Family Partnership and Life Insurance.

The firm represented a client who was paying over $150,000 premiums annually on life insurance policies on his life that were owned by an irrevocable trust. Because the client exceeded his lifetime gift tax exemption, the client was incurring gift tax on the premium payments.

To avoid the gift tax, the client was advised to form a partnership consisting of marketable securities, real estate and the life insurance policies on client’s life. The partnership paid the premiums, and the client avoided gift tax.

A ruling was requested of the National Office of Internal Revenue Service. The National Office concluded: (a) the premiums paid by the partnership were not taxable gifts; (b) the life insurance owned by the partnership would not be subject to estate tax in the client’s estate; and (c) no adverse income tax resulted on this transaction.

5. National Office of the Internal Revenue Service Letter Ruling - Family Partnership and Charitable Lead Trust.

The firm represented a client who placed nearly $10,000,000 of marketable securities in a family limited partnership. 10% of the limited partner interest was donated to a charitable lead trust. Under the terms of the trust, the named charity (the client's private foundation) would receive approximately 8% of the discounted value of the donated partnership interest on an annual basis for 15 years. At the end of 15 years, the partnership interest would pass to the client's children.

A ruling was requested of the National Office of Internal Revenue Service. The National Office concluded:

(a) Since the charitable lead trust was a grantor trust, it qualified for an income tax deduction equal to the present value of the annuity stream payable to the foundation over a 15-year period.

(b) The value of the gift to the children was discounted by the present value of the charity's interest.

(c) If the client died before the end of the 15-year period, no portion of the interest would be included in the client's estate. This was accomplished by having the Trustees of the private foundation, other than the client, make the decisions as to the annual distributions to the various charities.

(d) The Internal Revenue Service implicitly recognized the existence of the partnership, although, it did not give any opinion as to the amount of the discount.

6. Recent Settlements with the Internal Revenue Service:

The firm has dealt with the IRS on a number of gift and estate tax issues, income tax issues, and criminal tax issues. Our experienced attorneys have enabled us to achieve favorable settlements with the Internal Revenue Service on issues involving family partnerships and real estate partnerships. We are experienced in negotiating settlements involving offers in compromise and negotiated payment terms.

B. Trust and Estate Litigation Matters (New Jersey Superior Court)

1. Increase in Trust Income Beneficiary’s Distributions. On behalf of the beneficiary of a $3.5 million trust, we objected to the trustees’ consideration of her other assets in deciding whether to use corpus to pay her medical expenses. We also objected to the trustees’ diversification of investments equally between income and growth, because the beneficiary was an octogenarian who did not need long-term growth investments. In response to the trustees’ complaint for instructions from the Court, the investment issue was settled in mediation under the trustees’ power to adjust between principal and income under the Uniform Principal and Income Act, N.J.S.A. 3B:19B-4; and the payment of medical expenses was settled in accordance with a sliding scale.

2. Defense of Trustee Against Claim of Self-Dealing; Defense of Estate Against Verbal Claim to Asset. We defended the trustee of a trust and executor against significant claims of self-dealing and defalcation. We also defended the Estate against a claim that the decedent had verbally gifted real estate to one of the beneficiaries. On the day of trial, the case was settled by the beneficiary releasing his claim to the real estate in return for a certain payment. The settlement enabled the real estate to be sold for more than $6,000,000, and a portion of the sale proceeds was allocated to the aforesaid trustee to reduce his obligation to the trust.

3. Commutation of Trust Among Income Beneficiaries and Remaindermen. A trust of approximately $1.1 million empowered the life income beneficiary to dispose of corpus by testamentary appointment in his Will. We argued that the trust should be commuted with the consent of all beneficiaries and remaindermen, in order to remove the uncertainty that the remaindermen would not receive the corpus if the income beneficiary exercised his testamentary power of appointment. The Court agreed and commuted the trust into the actuarial values of the income interest and the remainder interest.

4. Holographic Will and Insurance Claim. On behalf of the estate of a 9/11 victim, we obtained the reformation of her holographic will to create a trust for her infant daughter, collected insurance policy proceeds of almost $1 million for her benefit, and obtained interest for the insurer’s delay in payment.

5. Inclusion of Joint Account in Probate Estate; Undervaluation of Estate Asset. On behalf of the exceptant to an accounting by the Executor of $2.6 million estate, we asserted that accounts titled in the joint names of the decedent and another were convenience accounts, which belong to the Estate instead of the surviving joint tenant; and that the Executor had undervalued partnership assets and sold real estate for a grossly inadequate consideration. The matter was settled favorably to our client.

6. Commutation of Charitable Remainder Trust Between Annuitant and Charity. The settlor of a self-settled trust of approximately $1.1 million retained the power to revoke the designation of a particular charity, thereby rendering the remainderman’s interest uncertain. In order to remove the risk that the remainderman might receive nothing, we argued that the trust should be commuted with the consent of the remainderman. The Court agreed and commuted the trust into the actuarial values of the income interest and the remainder interest.

7. Reformation of Testamentary Charitable Trust to Qualify for Deduction. We obtained the reformation of testamentary trusts into charitable remainder trusts of approximately $1.2 million in order to qualify for a charitable deduction that would minimize tax liability. When differences arose between the beneficiaries and trustees as to the investment strategy, we argued that the Court should commute the trusts to alleviate these differences. The Court agreed and commuted the trusts into the actuarial values of the income interest and remainder interest.

8. Invalid QTIP Election Over Credit Shelter Trust to Avoid Inclusion in Surviving Spouse’s Estate. The Executor of the approximately $1.1 million Estate of the wife, who predeceased her husband, made a mistaken and unnecessary QTIP election over a Credit Shelter Trust. The only assets of the QTIP Trust and the Credit Shelter Trust consisted of real estate. Following the death of the husband, we sued in the State Court on the grounds that the real estate automatically devolved into the two trusts by operation of law upon the wife’s death, irrespective of the mistaken QTIP election. The State Court entered a judgment setting forth the real estate values that funded each of the trusts. In proceedings before the U. S. Tax Court, the IRS recognized and followed the State Court’s decision.

9. Decedent’s Intent to Revoke Bequest to Spouse During Divorce Proceedings. The husband’s Will provided for his entire Estate of approximately $25 million to pass to his wife, but if she did not survive him, then 75% of the Estate was to pass to the wife’s nephews, and 25% was to pass to the Testator’s grandnephews and grandnieces. Thereafter, the Testator filed a domestic violence complaint against his wife for spousal abuse and a divorce complaint on the grounds of extreme cruelty. In the divorce case, an Order was entered whereby each party waived all rights under the other’s Will; however, the Testator died before the divorce judgment was entered. On behalf of the Testator’s grandnephews and grandnieces, we maintained that the Testator’s probable intent would not have been to leave his estate to the relatives of his wife. The matter settled on the day of trial favorably to our client.

10. Domicile of Decedent Employed Overseas. The main issue in this estate of approximately $3.5 million involved the domicile of the decedent. In 1969, a French citizen became domiciled in Bergen County, New Jersey. In 1972, her employer stationed her overseas in their office in Germany. The employee repeatedly returned to New Jersey but continued living in Germany until her death in 2006. While in Germany, she made a Will which the German Court admitted to probate. In an action to probate the German Will in New Jersey, we maintained that the decedent never gave up her New Jersey domicile, and that under N.J.S.A. 3B:3-24, the German proceedings were ineffective unless her Will was probated in New Jersey. The Court agreed and admitted the Will to probate in Bergen County, NJ.

11. Claim for Refund of Estate Following Will Contest. A prior Will Contest involved the issue of whether the Estate passed to tax-exempt charities or to individuals. In order to stop the running of interest upon any estate tax, the former attorney for the executors paid Estate tax. After it was determined in the Will Contest that the Estate passed to charities, the IRS disallowed a tax refund because the former attorney had not filed a refund claim together with the tax payment, and more than two years had elapsed since it was paid. We appealed to the Appeals Office of the IRS on the grounds that the prior correspondence constituted an informal claim for a refund. The Appeals Office agreed and the IRS refunded the tax payment.