Tax Court Values Children's Gift at $35 Million in QTIP Trust Dispute

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In Lewis v. Commissioner (Tax Court, July 20, 2026), the Tax Court ruled on how to value gifts made when two adult children, Linda and Peter, agreed to dissolve a QTIP trust — a type of trust that provides income to a surviving spouse during their lifetime, with the remaining assets passing to children afterward — and hand all $117 million-plus in assets outright to their stepfather Bruce. The children argued their surrendered interests were worth only $156,000 because Bruce held a power of appointment (the legal right to redirect trust assets) that could have cut them out anyway; the IRS said the gifts were worth roughly $53 million. The court rejected the heavy discount, reasoning that the mother Clotilde's intent was clearly to leave the assets to her children, not Bruce outright. The court also reduced the final gift values by the amount the children would have owed Bruce in gift-tax reimbursement under IRC Section 2207A had the trust wound down normally, landing on approximately $35 million each. The case is a warning for families considering nonjudicial settlement agreements to dissolve trusts: the tax bill can be enormous, and courts will look past technical arguments to the original grantor's intent when valuing what was given up.