Question;18. LO.4 Derek dies intestate (i.e., without a will) and is survived by a daughter, Ruth, and a grandson, Ted (Ruth?s son). Derek?s assets include a large portfolio of stocks and bonds and a beach house. Ruth has considerable wealth of her own, while Ted has just finished college and is unemployed. Under applicable state law, the order of priority as to heirship favors children followed by grandchildren.a. To minimize future transfer taxes, what action might Ruth take?b. What if Ruth wants only the beach house?19. LO.4 The Randalls have a married son and four grandchildren (ages 15, 17, 18, and19). They establish a trust under which the income is to be paid annually to the grandchildren until the youngest reaches age 25. At that point, the trust terminates and the principal (corpus) is distributed to the son. What annual gift tax exclusions are allowed, if any, on the creation of the trust? 20. LO.4 Qualified tuition programs under ? 529 enjoy significant tax advantages. Describe these advantages with regard to the Federal:a. Income tax.b. Gift tax.c. Estate tax.21. LO.5 Regarding the gift-splitting provision of ? 2513, comment on the following.a. What it was designed to accomplish.b. How the election is made.c. The treatment of any taxable gifts previously made by the nonowner spouse.d. The utility of the election in a community property jurisdiction.22. LO.5 In connection with the filing of a Federal gift tax return, comment on the following.a. No Federal gift tax is due.b. The gift is between spouses.c. The donor uses a fiscal year for Federal income tax purposes.d. The donor obtained from the IRS an extension of time for filing his or her Federal income tax return.23. LO.4 In each of the following independent situations, indicate whether the transfer is subject to the Federal gift tax.a. Asa contributes to his mayor?s reelection campaign fund. The mayor has promised to try to get some of Asa?s property rezoned from residential to commercial use.b. Mary Ann inherits her father?s collection of guns and mounted animals. Five months later, she disclaims any interest in the mounted animals.c. Same as (b). Ten months later, Mary Ann disclaims any interest in the guns.d. Haydon pays an orthodontist for the dental work performed on Michele, his dependent cousin.e. Same as (d), except that Michele is not Haydon?s dependent.f. Floyd creates a revocable trust with his children as the beneficiaries.g. Florence purchases a U.S. savings bond listing herself and Taylor (her daughter) as joint owners.h. Same as (g). One year later, Taylor predeceases Florence.i. Same as (g). One year later, Florence predeceases Taylor.24. LO.3, 6, 7 Distinguish between the following.a. The gross estate and the taxable estate.b. The taxable estate and the tax base.c. The gross estate and the probate estate.25. LO.6 Discuss the estate tax treatment of each of the following items occurring this year.In all cases, assume that Mike is the decedent and that he died on July 5.a. Interest on State of South Dakota bonds paid on August 1.b. Cash dividend on Puce Corporation stock paid on August 10. Date of record wasJuly 6.c. Same as (b). Declaration date was July 2.d. Distributions from traditional and Roth IRAs payable to Kirby (Mike?s surviving spouse).e. Same as (d), except that Kirby is Mike?s surviving daughter (not his spouse).f. Same as (d), except that the beneficiary is Mike?s estate.26. LO.6 At the time of Emile?s death, he was a joint tenant with Colette in a parcel of real estate. With regard to the inclusion in Emile?s gross estate under ? 2040, comment on the following independent assumptions:a. Emile and Colette received the property as a gift from Douglas.b. Colette provided the entire purchase price of the property.c. Colette?s contribution was received as a gift from Emile.d. Emile?s contribution was derived from income generated by property he received as a gift from Colette.27. LO.6 With regard to ?life insurance,? comment on the following.a. What the term includes (i.e., types of policies).b. The meaning of ?incidents of ownership.?c. When a gift occurs upon maturity of the policy.d. The tax consequences when the owner of the policy predeceases the insured and the beneficiary.e. The tax consequences when the owner-insured gives the policy to the beneficiary and dies shortly after making the gift.28. LO.6, 7 Due to the negligence of the other driver, Adam?s car is completely destroyed, and he is seriously injured. Two days later, Adam dies from injuries suffered in the accident.a. What, if any, are the estate tax consequences of these events?b. Are there any income tax consequences to Adam or his estate? Explain.29. LO.7 Bernice dies and, under a will, passes real estate to her surviving husband. The real estate is subject to a mortgage. For estate tax purposes, how will any marital deduction be determined? Can Bernice?s estate deduct the mortgage under ? 2053? Explain.30. LO.8 Three unmarried and childless sisters live together. All are of advanced age and in poor health, and each owns a significant amount of wealth. Each has a will that passes her property to her surviving sister(s) or, if no survivor, to their church. Within a period of two years and on different dates, all three sisters die. Discuss the Federal estate tax consequences of these deaths.31. LO.7, 8 Abby dies in the current year. In determining her Federal estate tax liability, comment on the relevance of each of the following.a. Abby made taxable gifts in 1975 and 2008.b. Abby held a life estate in a trust created by her late husband.c. State death taxes paid by Abby?s estate.d. Abby?s estate includes some assets inherited from a wealthy aunt several years ago.e. Abby?s estate includes some assets located in foreign countries.f. At the time of her death, Abby was receiving payments from a straight-life annuity she purchased from an insurance company several years ago.g. Abby was the insured on a life insurance policy taken out and owned by her son, Jackson.Upon Abby?s death, Jackson collects the proceeds as the beneficiary of the policy.h. Abby was a co-tenant with her two sisters in a tenancy in common created by her parents.32. LO.9 In terms of the generation-skipping transfer tax, comment on the following.a. A GSTT termination event and a GSTT distribution event look very similar.b. A direct skip can occur only in gift situations, not in testamentary situations.c. Spouses may be of different generations if there is enough disparity in their ages.d. How the election to split a gift by a married donor can help avoid the tax.33. LO.10 In terms of Federal tax consequences, why are lifetime transfers to charity preferable to testamentary transfers?
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