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. -Valuation of life estate interest created by transfer in trust.

Because of the estate tax deduction, a bequest to charity at death is preferable to a lifetime transfer.

Match each statement with the correct choice. Some choices may be used more than once or not used at all. -Donee's basis for loss.

At the time of her death, Carol owned 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 after-tax rate of return and goodwill exists, what is a possible value for the stock to be included in Carol's gross estate?

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.

Robert and Kristen are husband and wife. Ten years ago, they purchased stock for $500,000. Kristen dies before Robert when the property is worth $1,000,000. Assuming the property passes to Robert, what is his income tax basis under the following ownership assumptions? a. A joint tenancy is involved. b. Community property is involved. c. Why are the results different?

Doug inherited his mother's bedroom furniture worth $3,000. For sentimental reasons, Martha, the daughter, pays Doug $3,500 for the furniture. The furniture should be included in the mother's gross estate at $3,500.

In making a choice as to which assets to use in carrying out a program of lifetime giving, comment on the use of each of the following assets. a. Assets that have declined in value. b. Land that has appreciated in value. c. Life insurance policies.

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.

Mia, a resident of New Jersey, purchases realty for $600,000 listing title as "Mia and Ella, joint tenants with right of survivorship." Mia predeceases Ella when the realty is worth $3,000,000. Ella's income tax basis in the property is:

Taj leaves one-half of his estate to his wife, Ramona, and the remainder to a qualified charity. Taj's estate taxes are not reduced if Ramona disclaims her interest in favor of the charity.

For the IRS to grant a discretionary extension of time to pay estate taxes, the executor must show that the estate would otherwise undergo undue hardship.

Charlotte dies with a gross estate of $20 million. Her estate plan probably should:

Passing installment notes by death will not avoid any income tax on the deferred gain.

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

Giselle, a widow, has an extensive investment portfolio that has appreciated in value. Starting this year, she initiates a policy of making annual gifts of securities to her grandchildren who are attending college. Evaluate Giselle's policy in terms of the resulting: a. Federal gift and estate taxes. b. Federal income tax.

A special-use valuation election offers the estate:

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

Concerning the factors) utilized in valuing the stock in a closely held corporation, which of the following choice is correct?

Chloe makes a gift of stock in Snipe Corporation, which is not closely held but is traded in an over-the-counter market. The transactions involving this stock that occurred closest to the date of gift took place five trading days before mean selling price of $130) and seven days after mean selling price of $140). Determine the fair market value of the Snipe stock on the date of the gift.