Exam 19: Family Tax Planning

Presuming the § 2032A election is properly made in 2011, what value is included in the gross estate in each of the following independent situations?

Application of the blockage rule has been limited to just the valuation of stocks and bonds and not to other assets.

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

The deferral approach to the estate tax marital deduction (as opposed to the equalization approach) is advisable if the surviving spouse is in poor health and has many assets.

If a stock redemption is to be carried out, a cross-purchase type of buy and sell agreement must be involved.

Abigail makes a gift of stock (basis of $600,000; fair market value of $1,200,000) to her son, Spencer. As a result of the transfer, Abigail paid a gift tax of $120,000. What is Spencer's income tax basis in the stock if the gift occurred in 2011?

Ramon sells a parcel of land (basis of $100,000; fair market value of $300,000) to his church. As long as the selling price does not exceed $100,000, Ramon recognizes no gain on the sale.

In February 2010, Taylor sold real estate (adjusted basis of $200,000) for $600,000. Under the terms of the sale, the purchaser issued two notes of $300,000 each, payable annually. In January 2011 and when the notes are worth $560,000, Taylor gives the notes to her son. What, if any, are Taylor's tax consequences?

A discount for valuation purposes is allowed when the stock involved represents a minority interest.

Barney creates a trust, income payable to Chloe for five years, remainder to Emma. Emma is Barney's daughter (and a single parent), and Chloe is his 19-year old granddaughter. What might be the justification for this type of trust?

Leona sells land held as an investment (basis of $20,000; fair market value of $200,000) to her church for $20,000. Leona is not allowed a charitable deduction for income tax purposes since she recovered her cost of $20,000.

Curt owns the following assets which he gives to his daughter Carla in 2009 (no gift tax results). Both items have been held by Curt as an investment for more than one year. If Carla immediately sells these assets for $1 million ($400,000 + $600,000), she recognizes:

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

Whether an organization is a qualified charity for estate tax purposes depends on its status on the date the transfer takes place, and not when the will is executed.

Paula owns an insurance policy on her life payable to her estate. On Paula's death, the insurance proceeds are included in her gross estate but not her probate estate.

Becky inherited property from her mother seven years ago. The property was listed on her mother's estate tax return (Form 706) as having a value of $300,000. Becky is going to sell the property for $800,000, but she believes her real income tax basis is much more than $300,000. Which of the following factors, if any, helps Becky in challenging this basis?

Which, if any, of the following factors should reduce the value of a note receivable included in the gross estate of the holder?

Joan made taxable gifts of cash in 2009 and 2010. If Joan dies in 2011, for § 2032A purposes only the gift in 2010 is considered in meeting the special use valuation tests.

What are the advantages of § 6166 (extension of time when the estate consists largely of an interest in a closely held business)?

What is the rationale for the deferral and the equalization approaches to the marital deduction?