Exam 19: Family Tax Planning

Several years ago,Tad purchased land listing ownership as "Tad,Ellen,and Kay,equal tenants in common." In the current year,Kay dies first.One-third of the value of the land is included in Kay's probate estate.

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?

Kelsey is the founder of Blond Corporation and owns all of its stock,both common and preferred.The preferred stock is noncumulative and possesses no preferential rights as to liquidation.In 1996 and when the common stock has a value of $2,200,000,Kelsey gives it to her adult children.She retains the preferred stock which,at this time,has a value of $400,000.In 2012,Kelsey dies.Values on the date of death are: $4,000,000 for the common stock and $550,000 for the preferred.

Funding a cross-purchase type of buy and sell agreement with life insurance requires fewer policies than in the case of an entity type.

In valuing a life insurance policy that has not matured (i.e. ,the insured is still alive),it makes a difference whether the policy is paid up.

At the time of his death,Al owned a majority interest in Macaw Corporation,a closely held holding company.Macaw's major asset is stock in ABC Grocers,a regional supermarket chain.The ABC stock has a per share basis to Macaw of $50 and is currently worth $2,000.In what manner,if any,may these facts have a bearing on the value of the Macaw stock included in Al's gross estate?

Neither the transfer by gift or by death avoids the recognition (for income tax purposes)of any deferred interest on U.S.savings bonds.

What is the major disadvantage of an estate freeze using common and preferred stock in a corporation? Major advantage?

A gift of installment notes causes any deferred gross profit on the notes to be taxed to the donees.

In 2010,Arlene makes a gift of stock (basis of $813,000;fair market value of $413,000)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:

In connection with a traditional IRA that is transferred at death,comment on the tax implications of each of the following.

Which of the following procedures carried out will reduce both Mary's future gross estate and her probate estate?

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

How can a disclaimer by an heir increase the charitable deduction allowed a decedent? Is such a disclaimer always wise? Explain.

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.

A recapture of special use valuation will occur even if a qualified heir ceases to use the property for farming purposes but does not otherwise dispose of it.

Under proper circumstances,a disclaimer by an heir may increase the charitable deduction allowed a decedent.

A qualifying heir can make the § 2032A special valuation election only if he is not sure that he will keep the property for the full 10 years.

Joan made taxable gifts of cash in 2010 and 2011.If Joan dies in 2012,for § 2032A purposes both gifts are considered in meeting the special use valuation tests.

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?