Exam 19: Family Tax Planning

If a traditional IRA is subject to both estate and income taxes, a withdrawal by the heir constitutes income in respect of a decedent IRD).

If depreciable property is transferred by gift, any depreciation recapture potential carries over to the donee.

Bob and Paige are married and live in a common law state. Bob owns some real estate fair market value of $560,000) that the couple 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 for the Federal gift tax of $15,000, suggest a viable way to structure the transfer.

Edgar creates a trust, life estate to Connie age 46), remainder to Gene age 18). In determining the value of the life estate, use the multiple given in the IRS valuation table for a person age 18.

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

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

Application of the blockage rule has not been limited to just the valuation of stocks and securities; it has been applied to other assets.

An individual's lifetime gifts tend to:

Jacob makes a gift of property basis of $100,000; fair market value of $500,000) to his aunt, Mary. Ten months later and when the property is worth $550,000, Mary dies. Under Mary's will, the property passes to Isabella Jacob's wife). Isabella's basis in the property is $550,000.

Which, if any, are characteristics of the valuation tables issued by the IRS?

Match each statement with the correct choice. Some choices may be used more than once or not used at all. -Valuation of a life insurance policy that is not paid up.

Natalie creates a trust, income payable to Ava age 12) for 10 years, remainder to Samantha age 32). In determining the value of these two gifts i.e., income interest for a term certain and a remainder interest), use of more than one IRS valuation table will be necessary.

A decedent owned 25% of the voting stock of Siskin Corporation, which has 53 shareholders. The decedent's estate cannot elect the deferral of estate tax payments.

Eric, age 80, has accumulated about $6 million in net assets. Among his assets are the following marketable securities held as investments. Basis FMV Cardinal Corporation stock \ 200,000 \ 250,000 Crane Corporation stock 300,000 250,000 Hawk Corporation stock 50,000 250,000 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 at tax considerations and using only the assets described above, Eric's best choice is to:

Fred and Pearl always have lived in a community property state. At the time of Fred's prior death, 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? b. Does not elect the alternate valuation date?

A farm has a best-use valuation of $3 million and a current use valuation of $1.2 million. If death occurs in 2019 and § 2032A is elected, the farm can be valued in the deceased owner's gross estate at $1.2 million.

Jim makes a gift of property basis of $800,000; fair market value of $600,000) to his wife, Molly. Six months later Molly dies, and under her will, the property now worth $700,000) returns to Jim. Jim's income tax basis in the property now is $800,000.

Match each statement with the correct choice. Some choices may be used more than once or not used at all. -Can postpone the payment of any estate tax for 15 years from due date of the return.

Which of the following independent statements correctly reflects the valuation rules applicable to estate and gift taxes?

Lisa has been widowed three times. Her first husband died in 2011, leaving an unused exclusion amount of $3.5 million. The second husband died in 2013, leaving the entire $5.25 million exclusion amount unused. Lisa's third husband died in 2018 with an unused exclusion amount of $4 million. Lisa's DSUE amount is: