Exam 19: Family Tax Planning

Fred and Pearl always have lived in a community property state.At the time of Fred's prior death in 2012,they held stock that cost them $600,000 but was valued as follows. Under Fred's will,his half of the stock passes to their daughter,Brandi.What income tax basis will Pearl and Brandi have in the stock,if Fred's estate:

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.

The special use valuation method of § 2032A is available for valuing transfers by gift.

Describe the various tax advantages that are available from donating a conservation easement to charity.

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.

During 2011,it is possible for a surviving spouse to have an exclusion amount of as much as $10 million.

With respect to a stock interest in a closely held corporation,which,if any,of the following factors work to increase the gross estate value of the interest?

The election of § 2032 (alternate valuation date)for estate tax purposes:

Rick and Gail are equal tenants in common in real estate.Upon Gail's prior death,Rick's basis in the real estate does not change.

For the IRS to grant a discretionary extension of time to pay estate taxes (under § 6161),the executor must show that the estate would otherwise undergo undue hardship.

In April 2011,Ed gives his mother,Grace,real estate (basis of $400,000;fair market value of $800,000).Ed paid no Federal gift tax on the transfer.Before Grace's death in March 2012,she makes $30,000 in capital improvements to the property.The real estate is worth $820,000 when Grace dies.What is the income tax basis of the property to Grace's heir under each of the following assumptions?

Dustin owns all of the stock of Gold Corporation which includes both common and preferred shares.The preferred stock is noncumulative,has no redemption date,and possesses no liquidation preference.In 1995,Dustin makes a gift to his adult children of all of the common stock.He dies in 2012 still owning the preferred stock.The value of the Gold stock on the relevant dates is: One of the tax consequences of this estate freeze is:

In 1989,Tony,a resident of New York,purchases realty for $500,000 listing title as "Tony and Ben,joint tenants with right of survivorship." In 2012,Tony predeceases Ben when the realty is worth $2,000,000.Ben's income tax basis in the property is:

How could the election of the alternate valuation date (§ 2032)increase a decedent's charitable deduction?

Using investments worth $1 million,Roland establishes a trust,life estate to Melinda,remainder to Kim.

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.

Violet sells a parcel of land (basis of $100,000;fair market value of $300,000)to her church for $100,000.Violet is allowed a charitable income tax deduction of $200,000.

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

Doug inherited his mother's bedroom furniture worth $3,000.For sentimental reasons,Martha,the daughter,pays Doug $3,500 for the furniture.The furniture should be included in the mother's gross estate at $3,500.

Mel's estate includes a number of notes receivable signed by his daughter,Tammy.These notes were issued by Tammy on different occasions when she obtained funds from Mel.The total face amount of these notes is $150,000.The notes are forgiven by Mel's will.How much,if any,regarding these notes should be included in Mel's gross estate?