Exam 19: Family Tax Planning

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.

Which, if any, are characteristics of the valuation tables issued by the IRS?

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 -After death, vacation home is destroyed by fire.

Eight months after Noah died, Audrey sells stock that she inherited from him. If the stock was sold for less than its value on the date of Noah's death, Audrey has a short­term capital loss.

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 -Created during lifetime an irrevocable trust in which a life estate is retained with remainder interest passing to the children.

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. Blockage rule c. Special use value d. Best or most suitable use value e. Cost of going public f. Replacement cost of a comparable contract g. Portion of a deceased spouse's share of community property that passes to a surviving spouse h. Cross-purchase buy and sell agreement i. Entity buy and sell agreement j. Bypass amount k. No correct choice is given -Valuation of a life insurance policy that is not paid up.

The election of special use valuation estate tax savings has income tax implications.

A farm has a best use valuation of $2.9 million and a current use valuation of $2 million. If § 2032A is elected, the farm can be valued in the deceased owner's gross estate at $2 million.

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.

Jacob makes a gift of property (basis of $100,000; fair market value of $500,000) to his aunt, Mary. Ten months later and when the property is worth $550,000, Mary dies. Under Mary's will, the property passes to Isabella (Jacob's wife). Isabella's basis in the property is $550,000.

Noncommercial annuity contracts should be valued using the tables issued by the IRS.

Match each statement with the correct choice. Some choices may be used more than once or not used at all. a. Revocable 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. Depreciation recapture potential eliminated i. Alternate valuation date (§ 2032) j. Election to split gifts (§ 2513) k. No correct choice is given -Can produce income tax, ad valorem property tax, and estate tax savings.

Andrew makes a gift of securities (basis of $1,100,000; fair market value of $800,000) to his son, Carl. As a result of the transfer, Andrew paid a gift tax of $80,000. What is Carl's income tax basis in the securities if the gift occurred in 2013?

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. Blockage rule c. Special use value d. Best or most suitable use value e. Cost of going public f. Replacement cost of a comparable contract g. Portion of a deceased spouse's share of community property that passes to a surviving spouse h. Cross-purchase buy and sell agreement i. Entity buy and sell agreement j. Bypass amount k. No correct choice is given -Current use valuation as to certain realty (§ 2032A).

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?

Herbert leaves one­half of his estate to his wife, Ramona, and the remainder to a qualified charity. Herbert's estate taxes will not be reduced if Ramona disclaims her interest in favor of the charity.

When the annual exclusion was $14,000, Pam makes a gift of land (basis of $314,000; fair market value of $914,000) 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:

When carrying out an estate freeze with family limited partnerships, the donors make gifts of the limited partnership interests but retain the general partnership interests.

Brad and Heather are husband and wife and live in New Mexico. Under Brad's will, his share of the community property passes to the children. Upon Brad's prior death, there will be a change in Heather's income tax basis in her half of the community property.

When the annual exclusion was $14,000, Arlene makes a gift of stock (basis of $814,000; fair market value of $414,000) to her mother, Elizabeth. As a result of the transfer, Arlene paid a gift tax of $60,000. Elizabeth's income Tax basis in the stock is: