Exam 19: Family Tax Planning

Presuming that the special-use valuation election is properly made for a decedent who died in 2019, what value is included in the gross estate in each of the following independent situations? Special Use Best Use Value Value Situation A \ 4,000,000 \ 4,900,000 Situation B 1,200,000 3,000,000

If depreciable property is passed by death, any depreciation recapture potential carries over to the heir.

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.

For purposes of the election to defer Federal estate tax payments relative to an interest in a closely held business, an interest in a closely held business does not include:

In terms of future Federal income and estate tax savings, there are numerous advantages to making lifetime transfers. In this connection, comment on each of the following. a. Avoiding the tax on future appreciation. b. The annual exclusions utilized as to gifts. c. Payment of expenses prior to death.

At the time of his death, Jye was a shareholder in Grebe Corporation. In valuing the Grebe stock included in Jye's gross estate, the IRS contends that the corporation possessed considerable goodwill. In disputing this contention, which of the following points) is/are relevant?

Which, if any, of the following statements correctly reflects the operational rules under "special use" valuation?

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, could these facts have a bearing on the value of the Macaw stock included in Al's gross estate?

In 2019, Donna's father dies and leaves her the family farm. The farm has a current use value of $4,000,000 and a best use value of $4,500,000. If the special use valuation election is made, the farm should be included in the father's gross estate at a value of:

Match each statement with the correct choice. Some choices may be used more than once or not used at all. -Election by estate will reduce the amount of the gross estate.

Match each statement with the correct choice. Some choices may be used more than once or not used at all. -Doubles the number of annual exlusions available.

Match each statement with the correct choice. Some choices may be used more than once or not used at all. -Surviving spouse disclaims inheritance in favor of bypass amount.

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

Match each statement with the correct choice. Some choices may be used more than once or not used at all. -Discount attributable to a large number of shares.

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

Match each statement with the correct choice. Some choices may be used more than once or not used at all. -Discount for lack of marketability as to stock.

For most individuals, an estate plan should prefer:

At the time of Addison's death, he owned 70% of the stock in Robin Corporation, a closely held family business. Over the past five years, Robin has averaged annual profits of $400,000 in an industry where the typical after-tax rate of return is 9%. If the book value of the corporation's assets is $1,000,000 and goodwill exists, what might be a realistic value of the stock in Addison's gross estate?

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

A farm has a best-use valuation of $2.9 million and a current use valuation of $2 million. If § 2032A is elected, the farm can be valued in the deceased owner's gross estate at $2 million.