Exam 19: Family Tax Planning

In planning for the use of § 6166, what are several steps that can be taken to aid the owner of a small business while he or she is alive? In this connection consider the following.

Warren sells property that he inherited five years ago from his mother, Candice. Warren believes that the property was significantly undervalued when it was listed on the estate tax return filed for Candice's estate. For income tax purposes, can Warren deviate from this value? Explain.

Which of the following independent statements correctly reflects the valuation rules applicable to estate and gift taxes?

In 1985, Scott and Dana acquire land for $600,000 with Scott furnishing $200,000 and Dana $400,000 of the purchase price. Title to the property is listed as equal joint tenancy with right of survivorship. Scott dies first in 2011, when the land is worth $3,000,000. What is Dana's income tax basis in the property under each of the following assumptions?

Al creates a trust, income payable to John (age 18) for 8 years, remainder to Carol (age 36). In determining the value of John's interest, use the multiple provided in the tables for an 8-year term certain income interest.

A donee's income tax basis in property received as a gift will include any gift tax paid by the donor.

The election by an estate of § 2032A (special use valuation as to real estate) or § 2032 (the alternate valuation date) will have no effect on the income tax basis of the property received by the heirs.

Zane makes a gift of stock in Cerulean Company to family members. Cerulean is a closely held corporation that is not traded on any exchange. To hedge on the value used for gift tax purposes, Zane also donates some of the stock to a qualified charity. Explain the advantage of this approach.

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.

Lisa has been widowed three times. Her first husband died in 2009 leaving an unused exclusion amount of $3.5 million. The second husband died in early 2011 leaving the entire $5 million exclusion amount unused. Lisa's third husband died in late 2012 with an unused exclusion amount of $4 million. Lisa's DSUEA is:

Derrick dies, and under the terms of his will, all of his property passes outright to Dion (Derrick's surviving wife). Under these circumstances, there is no need for Derrick's executor to make a QTIP election.

Robert and Kristen are husband and wife. Ten years ago, they purchased stock for $500,000. Kristen dies first in 2011 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?

To prove successful in freezing the value of an interest in a family limited partnership (FLP), which, if any, of the following techniques is desirable?

Any recapture of special use valuation estate tax savings is imposed on the executor of the estate.

In 2011, Pam makes a gift of land (basis of $313,000; fair market value of $913,000) to her granddaughter, Tracy. As a result of the transfer, Pam paid a gift tax of $45,000. Tracy's income tax basis in the land is:

Paul dies and leaves his traditional IRA to Evelyn. Which statement is correct?

Which, if any, of the following statements correctly reflects the operational rules under § 2032A ("special use" valuation)?

After a prolonged illness, Claire has been diagnosed as having a terminal illness. Which of the following procedures best improves her Federal gift and estate tax situation?

In January 2011, Clint makes a gift of his beach house (basis of $113,000; fair market value of $413,000) to his aunt. As a result of the transfer, Clint pays a gift tax of $20,000. The aunt dies in December 2011, when the property is worth $420,000. Under the terms of the aunt's will, the property passes to Clint. Clint's income tax basis in the beach house is:

If a traditional IRA is subject to both estate and income taxes, a withdrawal by the heir constitutes income in respect of a decedent (IRD).