Exam 19: Family Tax Planning

Match each statement with the correct choice. Some choices may be used more than once or not used at all -Exemption equivalent

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?

Lisa has been widowed three times. Her first husband died in 2009 leaving an unused exclusion amount of $3.5 million. The second husband died in 2011 leaving the entire $5 million exclusion amount unused. Lisa's third husband died in 2012 with an unused exclusion amount of $4 million. Lisa's DSUE amount is:

When the annual exclusion was $14,000, Arlene makes a gift of stock (basis of $814,000; fair market value of $414,000) to her mother, Elizabeth. As a result of the transfer, Arlene paid a gift tax of $60,000. Elizabeth's income tax basis in the stock is:

Rick and Gail are equal tenants in common in real estate. Upon Gail's prior death, Rick's basis in the real estate does not change.

As to property received as a gift, a donee's income tax basis for gain or loss may not be the same.

Which, if any, of the following statements correctly reflects the operational rules under § 2032A ("special use" valuation)?

At the time of his death, Fred held some notes receivable for loans he made to his two daughters and the payment of which he forgives in his will. The amount to be included in Fred's gross estate as to these notes is not affected by his forgiveness.

Paula owns an insurance policy on her life payable to her estate. On Paula's death, the insurance proceeds are included in her gross estate and her probate estate.

Match each statement with the correct choice. Some choices may be used more than once or not used at all -Maximize marital deduction.

In a typical estate freeze involving family limited partnerships established by parents for their children:

Neither the transfer by gift or by death avoids the recognition (for income tax purposes) of any deferred interest on U.S. savings bonds.

Match each statement with the correct choice. Some choices may be used more than once or not used at all -A gift will not cause income tax consequences to the donor.

Zane makes a gift of stock in Cerulean Company to family members. Cerulean is a closely held corporation that is not traded on any exchange. To hedge on the value used for gift tax purposes, Zane also donates some of the stock to a qualified charity. Explain the advantage of this approach.

Eric, age 80, has accumulated about $6 million in net assets. Among his assets are the following marketable securities held as investments. Eric would like to donate (either by lifetime or testamentary transfer) $250,000 in value to his church. In addition, to consummate a land deal, he needs $250,000 in cash. Looking solely to tax: considerations and using only the assets described above, Eric's best choice is to:

The Nelsons make gifts of appreciated securities to their dependent daughter (age 20) and son (age 21), neither of which is a student. If the children sell the securities shortly thereafter, the kiddie tax will apply to tax the gain at the parents' tax rate.

Which, if any, of the following statements reflects the correct tax valuation rules?

During 2015, it is possible for a surviving spouse to have an exclusion amount of as much as $10.86 million.

The election by an estate of § 2032A (special use valuation as to real estate) or § 2032 (the alternate valuation date) will have no effect on the income tax basis of the property received by the heirs.

Match each statement with the correct choice. Some choices may be used more than once or not used at all -Eliminates common stock from donor's gross estate.