Spoliation is the “intentional destruction, mutilation, alteration, or concealment of evidence.”[1] The legal maxim In odium spoliatoris omnia praesumuntur means “all things are presumed to the prejudice of the despoiler.” If a potential litigant or party destroys, alters, or loses evidence in a manner that constitutes spoliation, a court may impose sanctions for the spoliation of that evidence.

To decide whether spoliation has occurred, a court will consider three factors: 1) the relationship of the evidence to the case; 2) the extent to which it is lost/damaged and 3) whether the party accused of spoliation knew or should have known that the evidence could be used in potential litigation. The case of Cody v. Target Corp.[2] is instructive as to what sanction should be meted out when a party spoliates evidence. In this case, a customer purchased what was thought to be an inflatable mattress from Target. Upon opening the box, the customer did not find an inflatable mattress, but instead some type of noxious gas container/device. Cody immediately returned the box to Target, but her family members began getting ill. Soon thereafter, Target disposed of the items. Following their lawsuit, the customers moved for spoliation sanctions. The circuit court imposed sanctions on Target finding liability and denying Target a causation defense.

It is important that parties involved in the spoliation of evidence are held accountable. As one court aptly put it: “Aside perhaps from perjury, no act serves to threaten the integrity of the judicial process more than the spoliation of evidence. Our adversarial process is designed to tolerate human failings — erring judges can be reversed, uncooperative counsel can be shepherded, and recalcitrant witnesses compelled to testify. But, when critical documents go missing, judges and litigants alike descend into a world of ad hocery and half measures — and our civil justice system suffers.”[3]

Understanding your duties regarding the preservation of evidence is critical. As soon as a legal dispute arises, it is paramount that you take steps to preserve evidence and that you take steps to hold others accountable for preserving evidence. For this reason, it is important that you seek the advice of one of our experienced attorneys who has previously dealt with issues of spoliation.

[1] Black’s Law Dictionary 1409 (7th ed. 1999).
[2] 2013 WI App 94, 349 Wis. 2d 525, 825 N.W.2d 290 – an unpublished decision (citable for persuasive value).
[3] Keithley v. The Home Store.com, Inc., 2008 U.S. Dist. LEXIS 61741 (N.D. Cal. Aug. 12, 2008), quoting United Medical Supply Co. v. United States, 77 Fed. Cl. 257, 258-59 (Fed. Cl. 2007).

In Wisconsin, all-terrain vehicles (ATVs) and utility terrain vehicles (UTVs) are becoming increasingly popular not only for recreation but for travel between and within local communities. In turn, more cities, villages, towns and counties are opening roads, streets and highways to ATV and UTV travel.

To start, ATVs and UTVs are regulated by state law through the Department of Natural Resources. Chapter 23.33 of the Wisconsin Statutes outlines numerous requirements from registration, to noise, to lighting and more. When it comes to access to roadways and highways, however, regulation largely falls on local communities.

State law allows local counties and municipalities to designate some or all highways and roadways under their jurisdiction as all-terrain vehicle routes. On designated routes, these local governments may enact ordinances that regulate the use of ATVs and UTVs. State law leaves local governments with discretion when it comes to regulating aspects of use on routes under their jurisdiction.

While local control is retained over travel within communities, this deference may result in a patchwork of different regulations affecting travel between communities. For example, while one community may limit hours of operation, another may have no limits. For these reasons, it is important to be familiar with the local laws of the communities you intend to travel before heading out on the road with your ATV or UTV.

Some basic things from state law to be aware of include registration as well as operator and occupant restrictions. With limited exceptions, ATV and UTV owners must register the vehicle with the State of Wisconsin. Non-residents may obtain an annual trail pass from the DNR. Generally, ATV operators must be at least 12 years of age and UTV operators must be at least 16. With some exceptions, those born on or after January 1, 1988 shall obtain a safety certificate issued by the DNR. With limited exceptions, those under 18 years of age must wear protective headgear. Furthermore, seatbelts are required for all occupants.

Remember, local communities may impose greater restrictions on operators and occupants. For example, local ordinances may require operators to be at least 16 years of age and hold a valid Wisconsin driver’s license. You should always check with local law enforcement prior to traveling between communities to ensure that you and your occupants will be in compliance with all laws governing all-terrain vehicle operation on locally designated routes.

Many people are aware that gift taxation rules exist, but do not understand the actual process for determining when reporting or payment is required. Fortunately, the types of gifts most people make each year fall under broad exclusions to the gift tax rules such as charitable giving, interspousal gifts, or annual exclusion amount gifting. This article focuses on annual exclusion amount gifting. Most individuals in the United States regularly rely on annual exclusion amounts to avoid filing burdens, for things like buying Christmas presents or treating someone to lunch, without ever realizing the exception is operating. However, relying on the annual exclusion amount without understanding it can lead to negative tax ramifications.

Before discussing the exception, we need to begin with the general rule. Internal Revenue Code Section 2503(a) provides that “taxable gifts” means the total amount of gifts made during the calendar year. A “gift” is a transfer of any type of property from one person to another for no or less than full fair market value. For example, if a person sells property with a fair market value of $100,000 to another for $100,000, no gift has occurred because the property was transferred for full value. If the property is instead given away for no payment, a gift of $100,000 has occurred. You may also be making a gift by allowing use of property without fair payment, even if the property itself is not outright transferred or is set to return to you. An example could be, residing in a property without rent or making an interest free loan. Determining “fair market value” can sometimes be difficult, but generally is the price which the property would trade hands for between unrelated individuals, both of which are fully informed about the characteristics of the property and under no compulsion to buy or sell it. Between unrelated parties, the presumption is that the transfer price is the fair market value. Between related parties, higher scrutiny is applied as it is more likely the transfer price was determined not by market value, but instead by charitable motivations.

IRC Section 2503(b) provides the annual exclusion rule. This rule exempts from “taxable gifts” an inflation adjusted at $10,000 (adjusted to $16,000 in 2022) annually made by any person to any other person. This annual amount prevents routine transfers like Christmas presents, birthday cards and paying for meals from requiring any special tax filings. Using up to the maximum amount each year for cash or security transfers is a common tool used by wealthy estate planning clients seeking to shift money out of their estates whose value may otherwise incur estate taxes at death. While $16,000 may not seem like much in the context of multi-million dollar estates, the multiplying force of “per donor” and “per recipient” can allow significant annual transfers. Consider a wealthy married couple with three children, each of whom are married with two children of their own. By using annual exclusion limits, each spouse can give to each child $16,000. They can give $16,000 to the spouse of their child plus additional $16,000 gifts from each grandparent to each grandchild. In this example, $384,000 a year could be transferred gift and estate tax free. The “annual” nature of the exclusion is measured by the calendar year, so it is common for transfers that may otherwise not qualify for the exemption to be split into separate smaller gifts on a December-of-one-year then January-of-the-next schedule.

Making annual exclusion gifts needs to be weighed against other options for the assets. Highly appreciated assets in estates without estate tax exposure would typically be better off being held until death to benefit from tax basis adjustment rules. Gifted assets generally have a “carryover” tax basis from the donor. Conversely, newly acquired stock expected to rise in value makes for a powerful transfer option, as the growth in value will occur under the new owner and has been removed from the donor’s estate at a relative discount compared to its anticipated future value.

To count as a gift completed in any given year, the gift must be of a “present interest” and “complete”. These requirements can become quite complex in certain types of advanced planning – such as Crummey withdrawal notices for gifts made with the intention to fund trusts or the ownership interests in highly restricted Family Investment LLCs. Generally, the requirements mean that the value and use of the property needs to have changed hands in an irrevocable manner and without contingencies. For example, telling a child in college “If you get all A’s this semester, I will give you $1,000” does not constitute a gift, but once the funds have changed hands, the gift would be complete. The same would apply to naming someone a beneficiary on a bank account as the designation is both revocable and payment is contingent on the grantor’s death. This differs from naming someone as a joint owner on an account, as that conveys an ownership interest at the time it is made. Failing to satisfy this requirement can create problems if large gifts are made in consecutive years. For example, if in 2022 a father gifts to their son a car worth $15,000 and then in 2023 gifts $15,000 worth of stock in their family business, then the gifts each year were under the annual exclusion limits. Conversely, if in 2022 the father tells his son, “Consider the car yours, I will get the title transferred soon”, then in 2023 the car is actually transferred and the gift of stock is made, then, because the gift of the car was not complete in 2022, both gifts took place in 2023 and the exemption is not large enough for both 2023 asset transfers.

If gifts are made in excess of the annual exclusion limit and no other exemption applies, then under the general rule of IRC Section 2503(a), the gift is a “taxable gift” and needs to be reported on IRS Form 709 – the gift tax return. However, this does not necessarily mean that any tax is owed – in fact it rarely does. Taxable gifts made during life reduce the amount of exemption available for the donor to use to protect assets from the estate tax at their death. To summarize, estate taxes operate by valuing the assets a person owned at their death, then applying a heavy tax on the value of assets over their exemption amount ($12,060,000 per person in 2022 – a historically high figure). So taxable gifts made during life reduce that exemption amount at death. If a person dies without owing estate taxes under the reduced amount, then no tax is collected at any point for the gifts made during their life. If the exemption is entirely used up, either during life or at death, then a tax is owed.

This combined system of gift and estate taxation makes sense when the legislative objectives are understood. Gifts and inheritances share the common trait of passing assets without compensation, usually to younger family members. Without the unified credit, large near-death or deathbed gifts could be used to avoid estate taxes, which are important for both revenue generation and curbing wealth inequality. However, without the annual exclusion exemption, the general rule of taxability would mean that every small routine gift would be a reportable gift. This would create a paperwork nightmare, both for average citizens whose tax filing burdens would substantially increase and for the IRS who would need to review and process these submissions. Further, because no tax is owed as long as there is available exemption, this massive paperwork burden would generate very little tax revenue as the vast majority of people do not have estates large enough to trigger the estate tax (at least under current exemption limits).

As a final note, it is important to understand that the annual exclusion gift exemption only applies for purposes of calculating taxable gifts – the exclusion does not apply for determining Medicaid eligibility and reportable transfers during the look back period, which are governed by entirely separate and far stricter rules. This article is meant to provide a basic overview of the gift tax system and annual exclusion gifting. As always, professional advice from an attorney or accountant should be sought when determining the effects of any specific course of action.