Exam 19: Family Tax Planning

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.

Passing installment notes by death will avoid any income tax on the deferred gain.

In each of the following independent situations,describe the effect of the disclaimer procedure on Ron'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 2011.

In January 2010,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 2010,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:

A disclaimer by a surviving spouse will generate additional estate tax since it reduces the amount of marital deduction allowed.

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?

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.

Regarding the effects of § 1014(e)(i.e. ,step-up in basis and the one-year rule),comment on the following variables.

Scott and Dana acquire land in 1985 for $800,000 with Scott furnishing $200,000 and Dana $600,000 of the purchase price.Title to the property is listed as equal joint tenancy with right of survivorship.Scott dies first in 2012,when the land is worth $4,000,000.What is Dana's income tax basis in the property under each of the following assumptions?

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

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.

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

If depreciable property is transferred by gift,any depreciation recapture potential carries over to the donee.

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.

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).

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

Giselle,a widow,has an extensive investment portfolio that has appreciated in value.Starting this year,she initiates a policy of making annual gifts of securities to her grandchildren who are attending college.Evaluate Giselle's policy in terms of the:

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.

Edgar creates a trust,life estate to Connie (age 46),remainder to Gene (age 18).In determining the value of the life estate,use the multiple given in the IRS valuation table for a person age 18.

Herbert leaves one-half of his estate to his wife,Ramona,and the remainder to a qualified charity.Herbert's estate taxes would be reduced if Ramona disclaims her interest in favor of the charity.