Exam 18: Family Tax Planning

Jen inherits her father's farm,and the executor of the estate properly makes a § 2032A election.Six years later,Jen sells the farm.It is determined that the election,which allowed $600,000 in value to be excluded,saved $120,000 in estate taxes.What are Jen's tax options? Tax consequences?

Cost and time are usually saved by passing ownership to out-of-state real estate by gift rather than by death.

Match each statement with the correct choice. Some choices may be used more than once or not used at all. a.Living trusts b.Income in respect of a decedent (IRD) c.Conservation easement d.Discretionary extension of time to pay estate tax (§ 6161) e.Estate freeze-corporations f.Extension of time involving interest in closely held business (§ 6166) g.Special use valuation as to certain realty (§ 2032A) h.Recapture potential under §§ 1245 and 1250 eliminated i.Alternate valuation date (§ 2032) j.Election to split gifts (§ 2513) k.No correct choice is given -Can postpone payments of the estate tax for up to 10 years from due date of the return.

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 -Purchased a certificate of deposit listing daughter as the beneficiary under a Totten trust payable on death designation.

Leonard inherits a traditional IRA from his wife.Leonard may roll over the IRA into his own and defer any distribution from it until age 70 1/2.

If a decedent's will allows the executor to substitute a different charity for the one named in the will,no charitable deduction for estate tax purposes is allowed.

In 1985,Justin,a resident of New York,purchases realty for $300,000 listing title as "Justin and Debra,tenants by the entirety with right of survivorship." In 2008,Justin predeceases Debra when the realty is worth $1,200,000.Debra's income tax basis in the property is:

In 2008,Clara's father dies and leaves her the family farm.The farm has a current use value of $2,000,000 and a best use value of $2,500,000.If the § 2032A election is made,the farm should be included in the father's gross estate at a value of:

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

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

In satisfying the more-than-35% test of § 6166 (i.e.,extended estate tax payment schedule relative to an interest in a closely held business),any prior gifts the decedent may have made must be considered.

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 -Mother purchases land listing ownership with decedent as joint tenants.

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?

Federal gift taxes paid on a pre-death gift can be subject to the Federal estate tax.

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 remainder interest created by transfer in trust.

A qualifying heir should not make the § 2032A special valuation election if he is not sure that he will keep the property for the full 10 years.

Which,if any,of the following statements properly characterize features involving buy-sell agreements?

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 -Two years prior to her death,the insured transferred by gift all of the incidents of ownership in an insurance policy on her life.The gift was to her son,the beneficiary of the policy.

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.Living trusts b.Income in respect of a decedent (IRD) c.Conservation easement d.Discretionary extension of time to pay estate tax (§ 6161) e.Estate freeze-corporations f.Extension of time involving interest in closely held business (§ 6166) g.Special use valuation as to certain realty (§ 2032A) h.Recapture potential under §§ 1245 and 1250 eliminated i.Alternate valuation date (§ 2032) j.Election to split gifts (§ 2513) k.No correct choice is given -Eliminates preferred stock from donor's gross estate.