Exam 18: Family Tax Planning

If § 6166 applies,a 2% rate of interest applies to the full amount of the estate tax value as to which the estate tax is deferred.

A traditional IRA is not subject to both estate and income taxes,so a withdrawal by the heir does not constitute income in respect of a decedent (IRD).

In satisfying the more-than-35% test for qualification under § 6166,interests in more than one closely held business are aggregated when the decedent's gross estate includes 20% or more of the value of each such business.

Match each statement with the correct choice. Some choices may be used more than once or not used at all. a.Step-up in basis b.Step-down in basis c.Gift of U.S. savings bonds d.Gift of depreciable property that has § 1245 or § 1250 recapture of depreciation potential e.Donor's basis on date of gift (appreciated property given)* f.The amount of the deceased spouse's gross estate does not change g.Fair market value on date of gift (depreciated property given)* h.Expected surviving spouse is already wealthy i.Income in respect of a decedent (IRD) j.Expected surviving spouse is in good health k.No correct choice is given *No gift tax involved -Decedent owned stock that had depreciated in value.

Presuming the year 2008 is involved,which,if any,of the following disclaimers was wise from a tax standpoint?

In each of the following independent situations,describe the effect of the disclaimer procedure on Rex's taxable estate.In this regard,advise as to how much should be disclaimed,by whom,and whether a disclaimer should be made.Assume the year involved is 2008. a.Rex's will leaves $2,200,000 to his adult son and the remainder ($900,000) to Geraldine (Rex's surviving wife). b.Rex's will leaves $2,000,000 to Geraldine (Rex's surviving wife) and the remainder ($1,250,000) to his adult daughter. c.Rex's will leaves $2,250,000 to Geraldine (Rex's surviving wife) and the remainder ($500,000) to a qualified charity.

In terms of future estate tax (and death 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.Preparing for the special use valuation method § 2032A. c.Avoiding the estate tax on any gift taxes paid. d.The annual exclusions utilized as to gifts. e.Payment of expenses prior to death.

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.