Exam 18: Family Tax Planning

Match each statement with the correct choice. Some choices may be used more than once or not used at all. a.Increases the probate estate b.Decreases the probate estate c.Has no effect on the probate estate -Made life insurance payable to children.

A recapture of special use valuation will occur even if a qualified heir ceases to use the property for farming purposes but does not otherwise dispose of it.

What is the justification,if any,for allowing a surviving spouse a change in income tax basis in his or her share of community property upon the death of the first spouse?

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

A well-known artist dies and among her assets are a large number of her paintings.What approach might be taken to lower the value of her estate?

Match each statement with the correct choice. Some choices may be used more than once or not used at all. a.Use IRS valuation tables b.Exclusion amount (exemption equivalent) c.Current use value d.Best or most suitable use value e.Cost of going public f.Replacement cost of a comparable contact g.Portion of a deceased spouse's estate that passes to a surviving spouse h.Entity buy and sell agreement i.Cross-purchase buy and sell agreement j.Discount for minority interest k.No correct choice is given -Valuation of a commercial annuity contract.

In January 2008,Sid makes a gift of his beach house (basis of $112,000; fair market value of $412,000)to his aunt.As a result of the transfer,Sid pays a gift tax of $20,000.The aunt dies in December 2008,when the property is worth $420,000.Under the terms of the aunt's will,the property passes to Sid.Sid's income tax basis in the beach house is:

For purposes of § 6166 (i.e.,extension of estate tax payments relative to an interest in a closely held business),an interest in a closely held business does not include:

When stock in a corporation is not traded,a discount for lack of marketability may be available.

Match each statement with a correct choice. Choices may be used more than once. a.Increases the probate estate b.Decreases the probate estate c.Has no effect on the probate estate -Purchased a straight life annuity from an insurance company.

At the time of her death,Tanya owned stock in Petrel Corporation.The stock is traded on a local exchange with the most recent selling prices as follows. Presuming no alternate valuation date election,Tanya's gross estate should include a per share value of

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

Match each statement with the correct choice. Some choices may be used more than once or not used at all. a.Increases the probate estate b.Decreases the probate estate c.Has no effect on the probate estate -Established a joint tenancy with right of survivorship.

If a decedent's household goods are sold through public auction,the price received should be the valuation used for Federal estate tax purposes.

If the special use valuation method of § 2032A is elected and certain continuing requirements are not satisfied,recapture occurs. a.What is the amount of recapture and upon whom is it imposed? b.In terms of basis for income tax purposes, what effect does recapture under § 2032A have?

In March 2007,Tyrone gives his mother,Grace,real estate (basis of $200,000; fair market value of $700,000).Tyrone paid no Federal gift tax on the transfer.Before Grace's death in February 2008,she makes $40,000 in capital improvements to the property.The real estate is worth $730,000 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 Tyrone's wife. b.The heir is Grace's brother (i.e., Tyrone's uncle).

In 2007,Sophia sold real estate (adjusted basis of $500,000)for $1,500,000.Under the terms of the sale,she received two notes of $750,000 each,with 9% interest provided.One note is due in 2008 and the other in 2009.She did not elect out of the installment method of recognizing gain.In 2008 and before the first note matures,Sophia gives both notes to her adult children.At this time,the notes are worth a total of $1,400,000.Disregarding the interest element,a tax result of these transactions is:

A farm has a best use valuation of $1.5 million and a current use valuation of $1 million.If § 2032A is elected,the farm can be valued in the deceased owner's gross estate at $1 million.

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?

Match each statement with the correct choice. Some choices may be used more than once or not used at all. a.Use IRS valuation tables b.Exclusion amount (exemption equivalent) c.Current use value d.Best or most suitable use value e.Cost of going public f.Replacement cost of a comparable contact g.Portion of a deceased spouse's estate that passes to a surviving spouse h.Entity buy and sell agreement i.Cross-purchase buy and sell agreement j.Discount for minority interest k.No correct choice is given -Bypass amount.