Exam 19: Family Tax Planning

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.

One of the objectives of establishing a program of lifetime giving is to transfer assets that are likely to appreciate in value.Examples include life insurance policies,valuable collections (e.g. ,art works),vacation homes,and undeveloped real estate.However,such gifts could cause economic problems for certain donees.Explain why.

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

Because of the estate tax deduction,a testamentary bequest to charity is preferable to a lifetime transfer.

Walt owns an insurance policy on his life with Doris as the designated beneficiary.On Walt's prior death,the proceeds of the policy are not part of his probate estate.

One way to dispute the existence of large goodwill is to argue that the decedent was not a key person in the operation of the business.

As to property received as a gift,a donee's income tax basis for gain or loss may be the same.

Ramon sells a parcel of land (basis of $100,000;fair market value of $300,000)to his church.As long as the selling price does not exceed $100,000,Ramon recognizes no gain on the sale.

Carol inherits her father's farm,and the executor of the estate properly makes a § 2032A election.Five years later,Carol sells the farm.It is determined that the election,which allowed $800,000 in value to be excluded,saved $160,000 in estate taxes.What are Carol's tax options? Tax consequences?

Which,if any,of the items listed below are valid factors utilized in valuing the stock in a closely held corporation?

At the time of his death,Fred held some notes receivable for loans he made to his two daughters and the payment of which he forgives in his will.The amount to be included in Fred's gross estate as to these notes is not affected by his forgiveness.

Richard and Marie are joint tenants in a tract of land.Upon Richard's prior death,Marie's income tax basis in the land does not change.

In 1990,Jude,a resident of New York,purchases realty for $500,000 listing title as "Jude and Tony,joint tenants with right of survivorship." In 2012,Tony predeceases Jude when the realty is worth $2,000,000.Tony's heirs have an income tax basis in the property of:

Five years ago,Emma purchased a residence and listed ownership as tenants by the entirety with her husband,Lucas.In the current year,Lucas predeceases Emma.Nothing is included in either the gross estate or probate estate of Lucas.

Harvey owns a certificate of deposit listed as: "Harvey,payable on proof of death to April." On Harvey's prior death,the CD is not subject to probate.

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

At the time of her death in 2012,Lila owns 50% of the stock in Kingfisher Corporation,with the balance of the stock held by family members.Kingfisher Corporation's total profits for the past five years are $3,000,000,and the book value of its stock is $2,000,000.If 8% is an appropriate rate of return and goodwill exists,what is a possible value for the stock to be included in Lila's gross estate?

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

Which,if any,of the following statements reflects the correct tax valuation rules?

For purposes of § 6166 (i.e. ,extension of estate tax payments relative to an interest in a closely held business),an interest in a closely held business does not include: