Exam 19: Family Tax Planning

Which statement is correct concerning the rules governing the application of § 2032A ("special use" valuation)?

Bob and Paige are married and live in a common law state.Bob owns some real estate (fair market value of $520,000)which they would like to give to their five adult married children.The spouses of their children (e.g. ,son-in-law,daughter-in-law)are to be included in the gifts.Bob and Paige do not want to use any of their unified transfer tax credit.Assuming a constant annual exclusion in the amount of $13,000,suggest a viable way to structure the transfer.

In June 2010,Debra makes a gift of securities (basis of $613,000;fair market value of $913,000)to her uncle,upon which a gift tax of $60,000 is paid.The uncle dies in July 2012,when the securities are worth $950,000.Under the terms of the uncle's will,the securities return to Debra.Debra's income tax basis in the securities is:

If a decedent's household goods are sold through public auction,the price received should be the valuation used for Federal estate tax purposes.

Which,if any,of the following statements correctly reflects the operational rules under § 2032A ("special use" valuation)?

In February 2011,Taylor sold real estate (adjusted basis of $200,000)for $600,000.Under the terms of the sale,the purchaser issued two notes of $300,000 each,payable annually.In January 2012 and when the notes are worth $560,000,Taylor gives the notes to her son.What,if any,are Taylor's tax consequences?

In each of the following independent situations,describe the effect of the disclaimer procedure on Ray's taxable estate.In this regard,advise as to how much should be disclaimed,by whom,and whether a disclaimer should be made,for the death in 2011.

One of the objectives of family tax planning is to minimize income taxes on transfers of property within the family unit.

Which,if any,of the following statements properly characterize features involving buy-sell agreements?

The quantity of stock that a decedent owns in a closely held corporation can have an effect on its valuation.Explain this statement.

In a typical "estate freeze" involving stock:

A decedent owned 25% of the voting stock of Siskin Corporation.Siskin has 53 shareholders.The decedent's estate can still qualify for the § 6166 election.

Ingrid's projected adjusted gross estate is as follows.

In April 2012,Tim makes a gift of real estate (basis of $900,000;fair market value of $800,000)to his aunt.After the gift,the aunt makes $50,000 worth of capital improvements to the property.The aunt dies in March 2013,when the property is worth $840,000.Under the aunt's will,the realty passes to Tim.Tim's income tax basis in the property is:

Eric,age 80,has accumulated about $6 million in net assets.Among his assets are the following marketable securities held as investments. Eric would like to donate (either by lifetime or testamentary transfer)$250,000 in value to his church.In addition,to consummate a land deal,he needs $250,000 in cash.Looking solely to tax: considerations and using only the assets described above,Eric's best choice is to:

In making a choice as to which assets to use in carrying out a program of lifetime giving,comment on the use of each of the following assets.

In an estate freeze,the common stock is taxed twice-first upon the gift,and second when the donor dies.

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.

Even though it results in more estate tax liability,the executor of an estate uses date of death value (rather than § 2032 alternate valuation date).

In 2012,Donna's father dies and leaves her the family farm.The farm has a current use value of $4,000,000 and a best use value of $4,500,000.If the § 2032A election is made,the farm should be included in the father's gross estate at a value of: