Assume the same facts as in Problem C:13-47 except that Yuji’s will also provided for setting up a trust to be funded with $400,000 of property with a bank named as trustee. His wife is to receive all the trust income semiannually for life, and upon her death the trust assets are to be distributed equally among Yuji’s children and grandchildren. a. What was the amount of Yuji’s taxable estate? Provide two possible answers. b. Assume Yuji’s widow died in December 2017. With respect to Yuji’s former assets, explain which items will be included in the widow’s gross estate. Provide two possible answers, but you need not indicate amounts. From problem 47: When Yuji died in March 2017, his gross estate was valued at $8 million. He owed debts totaling $300,000. Funeral and administration expenses were $12,000 and $120,000, respectively. The marginal estate tax rate exceeded his estate’s marginal income tax rate. Yuji willed his church $300,000 and his spouse $1.1 million. Calculate Yuji’s taxable estate.
> P Corporation owns all the stock of S1 and S2 Corporations, and the three corporations have filed consolidated tax returns on a calendar year basis for several years. P owns 2,400 shares of publicly traded stock it purchased several years ago for $30 per
> P Corporation owns all the stock of S and B Corporations. The three corporations have filed consolidated tax returns on a calendar year basis for several years. S owns property it had purchased for $40,000 several years ago. On August 1 of Year 1, S sell
> P, S1, and S2 Corporations have filed consolidated tax returns for several years. In the current year (Year 1), S1 sells land to S2 for $275,000. S1 purchased the land for $120,000 several years ago and has held it for possible expansion. S2 constructs a
> P Corporation acquires all the stock of S Corporation on October 15 of the current year, which is the 288th day of the year (and not a leap year). Neither corporation is affiliated with another corporation prior to the acquisition. P and S use the accrua
> P Corporation uses the calendar year as its tax year and the accrual method as its overall accounting method. S Corporation uses a fiscal year ending June 30 as its tax year and the cash method as its overall accounting method. On July 31, 2018, P acquir
> P Corporation owns all the stock of S1 and S2 Corporations. The corporations have filed calendar year, consolidated tax returns for several years. On September 15 of the current year, P sells all of S1’s stock to Michelle, an unrelated individual. What e
> Assume the same facts as in Problem C:8-32. What tax returns must the corporations file for the current year? From problem 32: P Corporation owns all of S Corporation’s stock. P and S have filed consolidated tax returns for several years. Determine wheth
> P Corporation owns all of S Corporation’s stock. P and S have filed consolidated tax returns for several years. Determine whether the affiliated group terminates in each of the following circumstances. Assume that all corporations use the calendar year a
> Pierre Corporation’s management is negotiating with Salem Corporation’s management to purchase some of Salem’s stock. Salem’s outstanding shares are as follows: Pierreâ€&
> In each of the following cases, determine the corporations that comprise an affiliated group. All corporations are includible corporations and have one class of stock unless otherwise indicated. a. P Corporation owns all the stock of S and T Corporations
> Cindy has a $4,000 basis in her partnership interest before receiving a nonliquidating (current) distribution of property having a $4,500 basis and a $6,000 FMV from the CDE Partnership. Cindy has a choice of receiving either inventory or a capital asset
> In each of the following cases, determine the corporations that comprise an affiliated group. All corporations are includible corporations and have one class of stock. a. B Corporation owns 100% of C Corporation’s stock and 90% of D Corporation’s stock.
> Bonnie, a widow, irrevocably transfers $1 million of property to a trust and names a bank as trustee. For as long as Bonnie’s daughter Carol is alive, Carol is to receive all the trust income annually. Upon Carol’s death, the property is to be distribute
> On September 1 of the current year, Mario irrevocably transfers a $100,000 whole life insurance policy on his life to Mario, Jr. as owner. On September 1, the policy’s interpolated terminal reserve is $30,000. Mario paid the most recent annual premium ($
> In the current year, Kent gives $42,000 cash to each of his eight grandchildren. His wife makes no gifts during the current year. a. What are Kent’s taxable gifts, assuming Kent and his wife do not elect gift splitting? b. How would your answer to Part
> Explain to a client the tax policy reason Congress allowed estates to make installment payments of the portion of the estate taxes attributable to closely held business interests.
> When is the S corporation’s tax return due? What extensions are available for filing the return?
> Andrew and Beth are equal partners in the AB Partnership. On December 30 of the current year, the AB Partnership agrees to liquidate Andrew’s partnership interest for a cash payment on December 30 of each of the next five years. What tax issues should An
> Determine the accuracy of the following statement: The gross estate includes a general power of appointment possessed by the decedent only if the decedent exercised the power.
> Why do some donors consider the qualified terminable interest property (QTIP) transfer an especially attractive arrangement for making gifts to their spouses?
> Explain to an executor an advantage and a disadvantage of electing the alternate valuation date.
> The ABC Partnership made the following current distributions in the current year. The dollar amounts listed are the amounts before considering any implications of the distribution. The land Alonzo received had been contributed by Beth two years ago when
> In what circumstances do gifts fail to qualify for the annual exclusion?
> What is the purpose of the gift tax annual exclusion?
> Assume that the properties included in Alex’s gross estate have appreciated during the six-month period immediately after his death. May Alex’s executor elect the alternate valuation date and thereby achieve a larger step-up in basis? Explain.
> Antonio would like to make a gift of a life insurance policy on his life. Explain to him what action he must take to make a completed gift.
> Does the exemption from the gift tax for direct payment of tuition encompass payments of non- relatives’ tuition? Explain.
> Which of the following classifications make a shareholder ineligible to own stock in an S corporation? a. U.S. citizen b. Domestic corporation c. Partnership where all the partners are U.S. citizens d. Estate of a deceased U.S. citizen e. Grantor tru
> Which of the following items are considered to be inventory for purposes of Sec. 751? a. Supplies b. Inventory c. Notes receivable d. Land held for investment purposes e. Lots held for resale
> Under what circumstances must the amount of the unified credit usually available be reduced (by a maximum amount of $6,000) even though the donor has never claimed any unified credit?
> Determine whether the following statement is true or false: Every donor who makes a taxable gift incurs a gift tax liability. Explain your answer.
> What was the Congressional purpose for enacting the gift-splitting provisions?
> Andrew contributed investment land having an $18,000 basis and a $22,000 FMV along with $4,000 in money to the ABC Partnership when it was formed. Two years later, the partnership distributed the investment land Andrew had contributed to Bob, another par
> Describe two ways in which the transfer tax (estate and gift tax) system is a unified system.
> Gaylord Gunnison (GG) died January 13, 2017, and his gross estate consisted of three properties—cash, land, and stock in a public company. The amount of cash on the date of his death was $2.9 million, which went into the estate. On January 13, 2017, the
> Matt Patterson died in early 2017 with a $4.5 million gross estate and no deductions other than a potential marital deduction. He bequeathed all his property to his spouse, Nancy, with the provision that, if Nancy predeceases him, the couple’s two adult
> Steve Silver, a new client, owns stock in HyTeche, Inc., which recently had an initial pub lic offering. In early 2017, his stock is valued at $8 million. His only other asset is $9 million of cash. Unfortunately, he has a terminal illness and has a life
> Arthur Zolnick died at age 84 on June 7, 2016. In March 2008, he transferred $4 million of stock to a charitable remainder annuity trust (CRAT) from which he named himself to receive $200,000 per year for life. He designated a charitable organization to
> Your firm has prepared the estate tax return (Form 706) for the Estate of Belinda Baker, a widow who died January 13, 2017. Besides substantial amounts of cash, mostly in certificates of deposit, she owned ABC stocks valued at $3.2 million, TUV stocks va
> Soon you will be meeting with a client who is considering moving to one of several other states and who currently does not have a will. You want to do some research regarding how property often passes if the decedent dies intestate (without a will). The
> Philip Seymour Hoffman died in February 2014, survived by three children (Cooper, Tallulah, and Willa) and their mother Marianne O’Donnell. His estate was estimated to have a net value of $35 million. Perform a Google search using the words “Philip Seymo
> George Tanner died October 2, 2016, survived by his son Thomas and his daughter Gigi Tanner Stewart and her children, Sam and Cindy. George was the sole stockholder of Tanner, Inc., a C corporation. Gigi served as president of Tanner from its inception u
> Sam and Taylor, residents of New Jersey, entered into a domestic partnership in New Jersey in October 2004. However, they never obtained a marriage license. Sam died in March 2017, survived by Taylor. Sam’s gross estate totals $10.2 million, he owed debt
> Three years ago, Mario joined the MN Partnership by contributing land with a $10,000 basis and an $18,000 FMV. On January 15 of the current year, Mario has a basis in his partnership interest of $20,000, and none of his precontribution gain has been reco
> In May 2008, Jasper Mason died, survived by his spouse Amber Mason and four adult children. His gross estate was valued at $3 million, and he had Sec. 2053 deductions of $120,000. His will left the personal residence on which the mortgage had been paid o
> Joseph Jernigan died in 2017 with a taxable estate of $4.1 million. He was survived by his spouse Josephine and several children. He made taxable gifts of $100,000 in 1974 and $650,000 in 2000. The property given in 1974 was valued at $425,000 when he di
> Bess, a widow, died in October 2017. Her gross estate, which totaled $7 million, included a $100,000 life insurance policy on her life that she gave away in 2015. The taxable gift that arose from giving away the policy was $15,000. In December 2014, Bess
> Sam Snider died February 14, 2016, survived by his spouse Janet and several children. Sam had not made any taxable gifts. Sam’s gross estate was $7 million. In each of the following independent situations, indicate the amount of Sam’s basic exclusion amo
> Assume the same facts as in Problem C:13-48 and that before Yuji’s death in 2017 his wife already owned property valued at $300,000. Assume that each asset owned by each spouse increased 8% in value by the surviving spouse’s date of death later in 2017 a
> Refer to Problem C:13-45. What is the net addition to Joy’s taxable estate with respect to the insurance policies if all the property passing under Joy’s will was left to Joy’s son? From problem 45: J
> Joy died on November 5, 2017. Soon after Joy’s death, the executor discovered the following insurance policies on Joy’s life. Joy transferred ownership of policies 757 and 848 to her son in 2009. She gave ownership of
> Tai was the sole income beneficiary for life of each of the trusts described below. For each trust, indicate whether and why it was includible in Tai’s gross estate. a. A trust created under the will of Tai’s mother, who died in 1996. Upon Tai’s death,
> Maria died two years after her retirement. At the time of her death at age 67, she was covered by the two annuities listed below. • An annuity purchased by Maria’s father providing benefits to Maria upon her attaining age 65. Upon Maria’s death, surviv
> Complete the chart for each of the following independent distributions. Assume that all distributions are nonliquidating and pro rata to the partners, that no contributed property was distributed, that all precontribution gain has been recognized before
> John died in 2017. What amount, if any, was included in his gross estate in each of the following situations: a. In 1997, John created a revocable trust, funded it with $400,000 of assets, and named a bank as trustee. The trust instrument provided that
> In December 2015, Curt and Kate elected gift splitting to report $16,228,000 of gifts of stocks Curt made to Curt, Jr. Each paid gift taxes of $1,068,000 by spending his or her own funds. Kate died in January 2017 and was survived by Curt. Her only taxab
> In December 2015, Jody transferred stock having an $8,114,000 FMV to her daughter Joan. Jody paid $1,068,000 ($3,185,800 - $2,117,800) of gift taxes on this transfer. When Jody died in January 2017, the stock was valued at $9 million. Jody made no other
> Val died on May 13, 2017. On July 3, 2015, she gave a $400,000 life insurance policy on her own life to son Ray. Because the value of the policy was relatively low, the transfer did not cause any gift tax to be payable. a. What amount was included in Va
> Elaine died on May 1, 2017. Her gross estate consisted of the following items: Elaine’s Sec. 2053 deductions totaled $200,000. She had no other deductions. a. What percentage of Elaine’s federal estate taxes can be p
> Jeung Hong, a widower, died in March 2017. His gross estate was $6.5 million and, at the time of his death, he owed debts of $60,000. His will made a bequest of $200,000 to his undergraduate alma mater and left the rest of his property to his children. H
> Assume the same facts as in Problem C:13-29 except that Annie’s will leaves all her property to a QTIP trust for Dave for life with the remainder to their children. What tax issues should Dave James and the estate’s executor consider with respect to the
> Annie James died early in 2017. All her property passed subject to her will, which provides that her surviving husband, Dave James, is to receive all the property outright. Her will further states that any property Dave disclaims will pass instead to the
> Henry Arkin (a widower) is quite elderly and is beginning to engage in some estate planning. His goal is to reduce his transfer taxes. He is considering purchasing land with a high potential for appreciation and having it titled in the names of himself a
> From a tax standpoint, describe an advantage a very wealthy married person would achieve by disposing of an amount equal to the exemption equivalent (basic exclusion amount) to individuals other than his or her spouse?
> Lisa has a $25,000 basis in her partnership interest before receiving a current distribution of $4,000 cash and land with a $30,000 FMV and a $14,000 basis to the partnership. Assume that any distribution involving Sec. 751 property is pro rata, that any
> Refer to Problem C:13-24. Explain the negative tax considerations (if any) with respect to Bala’s making gifts of the assets that you recommended. From problem 24: Explain which of the following assets you would recommend that Bala transfer during his li
> Explain which of the following assets you would recommend that Bala transfer during his lifetime (more than one asset may be suggested): a. Life insurance on his life b. Cash c. Corporate bonds (assume interest rates are expected to rise) d. Stock in
> Assume that Larry is wealthier than Jane, his wife, and that he is likely to die before her. From an overall tax standpoint (considering transfer taxes and income taxes), is it preferable for Larry to transfer property to Jane inter vivos or at death, or
> Compare the credits available for estate tax purposes with the credits available for gift tax purposes. What differences exist?
> Judy died and was survived by her husband, Jason, who received the following interests as a result of his wife’s death. Does Judy’s estate receive a marital deduction for them? Explain. a. $400,000 of life insurance proceeds; Jason is the beneficiary;
> Compare the tax treatment of administration expenses with that of the decedent’s debts.
> List the various categories of estate tax deductions, and compare them with the categories of gift tax deductions. What differences exist?
> Carlos died six years before his wife Maria died. His will called for the creation of a trust to be funded with $1 million of property. The bank trustee was required to distribute all the trust income semiannually to Maria for the rest of her life. Upon
> Joe’s will required property to be put in trust with a bank as trustee. His will named his sister Tess to receive the trust income annually for life and empowered Tess to will the property to whomever she so desires. In addition, Tess may require that th
> Indicate two situations in which property that has previously been subject, at least in part, to gift taxation is nevertheless included in the donor decedent’s gross estate.
> XYZ Limited Partnership has more than 300 partners and is publicly traded. XYZ was grandfathered under the 1987 Tax Act and has consistently been treated as a partnership. In the current year, XYZ will continue to be very profitable and will continue to
> Describe two circumstances in which life insurance on a decedent’s life is includible in the gross estate under Sec. 2042. If insurance policies on the decedent’s life escape being included under Sec. 2042, are they definitely excluded from the gross est
> When does the consideration furnished test apply to property that the decedent held as a joint tenant with right of survivorship?
> A widow owns a valuable eighteenth-century residence that she would like the state historical society to own someday. Explain to her the estate tax consequences of the following two alternatives: a. Deeding the state historical society a remainder inter
> A client is considering making a very large gift. She wants to know whether the gross-up rule will apply to the entire amount of gift taxes paid by both her and her spouse if the spouses elect gift splitting and she dies within three years of the gift. E
> Explain the difference between the estate tax treatment for gift taxes paid on gifts made two years before death and on gifts made ten years before death.
> From a tax standpoint, which of the following alternatives is more favorable for a client’s estate? a. Buying a new insurance policy on his life and soon thereafter giving it to another person b. Encouraging the other person to buy the policy with fund
> A decedent transferred land to an adult child by gift two years before death. Is the land included in the decedent’s gross estate? In the estate tax base?
> Explain how shares of stock traded on a stock exchange are valued. What is the blockage rule?
> Compare the valuation for gift and estate tax purposes of a $150,000 group term life insurance policy on the transferor’s life.
> A client requests that you explain the valuation rules used for gift tax and estate tax purposes. Explain the similarities and differences of the two sets of rules.
> Three individuals recently formed Krypton Company as a limited liability company (LLC). The three individuals—Jeff, Susan, and Richard—own equal interests in the company, and they all have substantial income from other sources. Krypton is a manufacturing
> In general, at what amount are items includible in the gross estate valued? (Answer in words.) Indicate one exception to the general valuation rules and the reason for this exception.
> In general, when is the estate tax due? What are some exceptions?
> Assume the same facts as in Problem C:13-57 except the joint tenancy land was held in the names of Bonnie and her son Doug, joint tenants with right of survivorship. Also assume that Bonnie provided 55% of the consideration to buy the land and that Bonni
> Bonnie died on June 1, 2017, survived by her husband, Abner, and two sons, Carl and Doug. Bonnie’s only lifetime taxable gift was made in October 2015 in the taxable amount of $6.25 million. She did not elect gift splitting. By the time of her death, the
> Your client is Jon Jake, the executor of the Estate of Beth Adams, a widow. Mrs. Adams died 11 years after the death of her husband, Sam. Mr. Jake seeks assistance in the preparation of the estate tax return for Mrs. Adams, whose estate consists primaril
> Your long-time client, Harold (Hal) Holland will meet with your supervising partner next week for an estate planning appointment. Hal has been married to Winona Holland for 25 years. Hal is age 68 and retired. Winona, age 60, retired early to spend more
> Ilene Ishi is planning to fund an irrevocable charitable remainder annuity trust with $100,000 of cash. She will designate her sister, age 60, to receive an annuity of $5,000 per year for 15 years and State University to receive the remainder at the end
> George and Martha, spouses, made a number of gifts during 2017. Their accountant is trying to help them decide whether to elect gift splitting. If they elect gift splitting, each spouse will have $4 million of taxable gifts. If they do not elect gift spl
> What was the Sec. 7520 rate for May, June, and July 2016?
> Your manager wants you to participate in delivering a staff training course on the basics of gift taxation. Your assignment is to discuss Crummey trusts. You want to increase your knowledge of some of the advantages and disadvantages of such trusts. Cond
> Alex owns 60% of the Hot Wheels LLC, which is treated as a partnership. He plans to give 15% of the LLC (one fourth of his interest) to his daughter Haley for her high school graduation. He plans to put her interest in a trust, and he will serve as the t
> On August 3, 2014 Ginger Grayson, a widow, transferred $55,000 to each of two Sec. 529 plans (qualified tuition programs), one for grandson Greg Grayson and one for granddaughter Gayle Grayson. Her tax preparer, not a CPA, prepared a Form 1040 (individua
> Consult the case Estate of Edward S. Redstone, 145 T.C. No. 11 (2016), a rather complicated case, and answer the following uncomplicated questions: a. When did the alleged gift occur, and when did the IRS issue a notice of deficiency? b. Why was the IRS
