Audrey Walton put about $200 million of Wal-Mart stock into two trusts reported as gifts worth nothing, and the Tax Court ruled for her against the IRS

Audrey J. Walton was the former wife of the brother of Wal-Mart founder Sam Walton. In 1990 Congress replaced a trust it had called abusive with the grantor retained annuity trust, or GRAT. About three years later the New York lawyer Richard Covey set up two GRATs for her, each funded with about $100 million of Wal-Mart stock and each running two years. She would receive annuity payments. Whatever was left at the end would go to her daughters, Ann Walton Kroenke and Nancy Walton Laurie. If she died during the term, the payments went to her estate. She filed a gift tax return valuing the gifts at zero. The IRS relied on an example in its own regulation, said each gift was worth about $3.8 million, and took her to court. On 22 December 2000 the Tax Court, in an opinion by Judge Arthur Nims for a unanimous court, held the example invalid and ruled for her. Wal-Mart stock underperformed, and the daughters received nothing from the two trusts. The IRS accepted the result in Notice 2003-72, and the Treasury rewrote the regulation in 2005. Covey told Bloomberg in 2013 that the technique could have cost the government more than $100 billion since 2000. Bloomberg reported that Sheldon Adelson used such trusts to pass at least $7.9 billion to his family, avoiding about $2.8 billion in gift tax.