Question 1

Wesley has created an irrevocable trust: life estate to Eve, remainder to Ernest upon Eve's death. In using the IRS valuation tables, what information is needed to determine the value of Eve's life estate?

Accepted Answer

The answer of Wesley has created an irrevocable trust: life...

Question 2

At the time of his death, Al owned a majority interest in Macaw Corporation, a closely held holding company. Macaw's major asset is stock in ABC Grocers, a regional supermarket chain. The ABC stock has a per share basis to Macaw of $50 and is currently worth $2,000. In what manner, if any, may these facts have a bearing on the value of the Macaw stock included in Al's gross estate?

Accepted Answer

The answer of At the time of his death, Al...

Question 3

If the special use valuation method of § 2032A is elected and certain continuing requirements are not satisfied, recapture occurs. What is the amount of recapture and upon whom is it imposed?

Accepted Answer

The answer of If the special use valuation method of...

Question 4

Mason is the founder of Garnet Corporation and owns all of its stock, both common and preferred. The preferred stock is noncumulative and possesses no preferential rights as to liquidation. In 1996 and when the common stock has a value of $3,200,000, Mason gives it to his adult children. He retains the preferred stock which, at this time, has a value of $500,000. In 2013, Mason dies. Values on the date of death are: $4,500,000 for the common stock and $650,000 for the preferred.
a. What is the amount of the gift Mason makes in 1996?
b. How much as to Garnet Corporation is included in Mason's gross estate in 2013?

Accepted Answer

The answer of Mason is the founder of Garnet Corporation...

Question 5

At the time of her death in 2012, Carol owns 60% of the stock in Drab Corporation, with the balance of the stock held by family members. Drab Corporation's total profits for the past five years are $3,200,000, and the book value of its stock is $2,400,000. If 8.5% is an appropriate rate of return and goodwill exists, what is a possible value for the stock to be included in Carol's gross estate?

Accepted Answer

The answer of At the time of her death in...

Question 6

Ingrid's projected adjusted gross estate is as follows.
  
a. Presuming that Ingrid expects her estate to elect the special use valuation of § 2032A, what do you suggest?
b. What could go wrong?

Accepted Answer

The answer of Ingrid's projected adjusted gross estate is as...

Question 7

In each of the following independent situations, describe the effect of the disclaimer procedure on Ron's taxable estate. In this regard, advise as to how much should be disclaimed, by whom, and whether a disclaimer should be made. Assume the year involved is 2013.
a. Ron's will leaves $5,400,000 to his adult son and the remainder ($900,000) to Rita (Ron's surviving wife).
b. Ron's will leaves $8,000,000 to Rita (Ron's surviving wife) and the remainder ($2,000,000) to his adult daughter.
c. Ron's will leaves $5,450,000 to Rita (Ron's surviving wife) and the remainder ($500,000) to a qualified charity.

Accepted Answer

The answer of In each of the following independent situations,...

Question 8

Mel's estate includes a number of notes receivable signed by his daughter, Tammy. These notes were issued by Tammy on different occasions when she obtained funds from Mel. The total face amount of these notes is $150,000. The notes are forgiven by Mel's will. How much, if any, regarding these notes should be included in Mel's gross estate?

Accepted Answer

The answer of Mel's estate includes a number of notes...

Question 9

Abigail makes a gift of stock (basis of $600,000; fair market value of $1,200,000) to her son, Spencer. As a result of the transfer, Abigail paid a gift tax of $120,000. What is Spencer's income tax basis in the stock if the gift occurred in 2013?

Accepted Answer

The answer of Abigail makes a gift of stock (basis...

Question 10

Travis and Kim acquire land in 1985 for $900,000 with Travis furnishing $300,000 and Kim $600,000 of the purchase price. Title to the property is listed as equal joint tenancy with right of survivorship. Kim dies first in 2013, when the land is worth $3,000,000. What is Travis's income tax basis in the property under each of the following assumptions?
a. Travis and Kim are brother and sister.
b. Travis and Kim are husband and wife.
c. Travis and Kim are husband and wife and the land is community property.

Accepted Answer

The answer of Travis and Kim acquire land in 1985...

Question 11

Andrew makes a gift of securities (basis of $1,100,000; fair market value of $800,000) to his son, Carl. As a result of the transfer, Andrew paid a gift tax of $80,000. What is Carl's income tax basis in the securities if the gift occurred in 2013?

Accepted Answer

The answer of Andrew makes a gift of securities (basis...

Question 12

In arriving at the value of stock in a closely held business, the IRS frequently imputes goodwill. Comment on how the following independent factors would affect the determination of goodwill.
a. Past profits include a large nonoperating gain.
b. Shareholder-employees have not been receiving adequate compensation for their services.
c. The shareholders have been financing corporate operations with interest-free loans.

Accepted Answer

The answer of In arriving at the value of stock...

Question 13

Fred and Pearl always have lived in a community property state. At the time of Fred's prior death in 2013, they held stock that cost them $600,000 but was valued as follows.
Date of Death Six Months Later
$5,300,000 $5,200,000
Under Fred's will, his half of the stock passes to their daughter, Brandi. What income tax basis will Pearl and Brandi have in the stock, if Fred's estate:
a. Elects the alternate valuation date of § 2032?
b. Does not elect the alternate valuation date of § 2032?

Accepted Answer

The answer of Fred and Pearl always have lived in...

Question 14

Using investments worth $3 million, Keith establishes a trust, life estate to Melinda, remainder to Dana.
a. Has Keith made one gift or two gifts?
b. How does your answer affect the Federal transfer tax liabilities?

Accepted Answer

The answer of Using investments worth $3 million, Keith establishes...

Question 15

In April 2012, Jacob gives his mother, Grace, real estate (basis of $500,000; fair market value of $900,000). Jacob paid no Federal gift tax on the transfer. Before Grace's death in March 2013, she makes $20,000 in capital improvements to the property. The real estate is worth $910,000 when Grace dies. What is the income tax basis of the property to Grace's heir under each of the following assumptions?
a. The heir is Jacob's wife.
b. The heir is Grace's brother (i.e., Jacob's uncle).

Accepted Answer

The answer of In April 2012, Jacob gives his mother,...

Question 16

Bob and Paige are married and live in a common law state. Bob owns some real estate (fair market value of $560,000) which they would like to give to their five adult married children. The spouses of their children (e.g., son- in-law, daughter-in-law) are to be included in the gifts. Bob and Paige do not want to use any of their unified transfer tax credit. Assuming an annual exclusion in the amount of $14,000, suggest a viable way to structure the transfer.

Accepted Answer

The answer of Bob and Paige are married and live...

Question 17

Presuming the § 2032A election is properly made in 2013, what value is included in the gross estate in each of the
following independent situations?

Accepted Answer

The answer of Presuming the § 2032A election is properly...

Question 18

In February 2012, Taylor sold real estate (adjusted basis of $200,000) for $600,000. Under the terms of the sale, the purchaser issued two notes of $300,000 each, payable annually. In January 2013 and when the notes are worth
$560,000, Taylor gives the notes to her son. What, if any, are Taylor's tax consequences?

Accepted Answer

The answer of In February 2012, Taylor sold real estate...

Question 19

The quantity of stock that a decedent owns in a closely held corporation can have an effect on its valuation. Explain this statement.

Accepted Answer

The answer of The quantity of stock that a decedent...

Question 20

Barney creates a trust, income payable to Madison for five years, remainder to Emma. Emma is Barney's daughter (and a single parent), and Madison is his 19-year old granddaughter. What might be the justification for this type of trust?

Accepted Answer

The answer of Barney creates a trust, income payable to...

Quiz 19: Family Tax Planning

Wesley has created an irrevocable trust: life estate to Eve, remainder to Ernest upon Eve's death. In using the IRS valuation tables, what information is needed to determine the value of Eve's life estate?

If the special use valuation method of § 2032A is elected and certain continuing requirements are not satisfied, recapture occurs. What is the amount of recapture and upon whom is it imposed?

Ingrid's projected adjusted gross estate is as follows. a. Presuming that Ingrid expects her estate to elect the special use valuation of § 2032A, what do you suggest? b. What could go wrong?

Abigail makes a gift of stock (basis of $600,000; fair market value of $1,200,000) to her son, Spencer. As a result of the transfer, Abigail paid a gift tax of $120,000. What is Spencer's income tax basis in the stock if the gift occurred in 2013?

Andrew makes a gift of securities (basis of $1,100,000; fair market value of $800,000) to his son, Carl. As a result of the transfer, Andrew paid a gift tax of $80,000. What is Carl's income tax basis in the securities if the gift occurred in 2013?

Using investments worth $3 million, Keith establishes a trust, life estate to Melinda, remainder to Dana. a. Has Keith made one gift or two gifts? b. How does your answer affect the Federal transfer tax liabilities?

Presuming the § 2032A election is properly made in 2013, what value is included in the gross estate in each of the following independent situations?

The quantity of stock that a decedent owns in a closely held corporation can have an effect on its valuation. Explain this statement.

Barney creates a trust, income payable to Madison for five years, remainder to Emma. Emma is Barney's daughter (and a single parent), and Madison is his 19-year old granddaughter. What might be the justification for this type of trust?