Chapter 27: 34, 36, 45, 50 and 57 34. Arlene’s estate includes the following assets.

Fair Market Value Date of Death Apartment building $4,400,000 Stock in Red Corporation 1,200,000 Stock in Tan Corporation 900,000 Six months later $4,380,000 1,300,000 700,000

Accrued rents on the apartment building are as follows: $70,000 (date of death) and $60,000 (six months later). To pay expenses, the executor of Arlene’s estate sells the tan stock for $600,000 months after her death. a. If the 2032 election is made, how much is included in Arlene’s gross estate? b. As to part (a), assume that the Tan stock is sold for $600,000 eight months (rather than five months) after Arlene’s death. How does this change your answer, if at all? c. How much is included in the gross estate if the 2032 election is not made? a. $6,350,000. $4,380,000 (apartment building) + $70,000 (accrued rents) + $1,300,000 (Red stock) + $600,000 (Tan stock) = $6,350,000. The accrued rents are determined as of date of death. b. c. $6,450,000. As the Tan stock was not sold within the six month period after death, value on date of disposition does not control. $6,570,000. $4,400,000 + $70,000 + $1,200,000 + $900,000 = $6,570,000.

36. Carl made the following transfers during 2012. * Transferred $900,000 in cash and securities to a revocable trust, life estate to himself and remainder interest to his three adult children by a former wife. * In consideration of their upcoming marriage, gave Lindsey (age21) a $90,000 convertible. * Purchased a $100,000 certificate of deposit listing title as “Carl, payable on proof of death to Lindsey * Purchased for $80,000 a paid up insurance policy on his life (maturity value of $500,000). Carl designated Lindsey as the beneficiary

The mere purchase of the CD with ownership based on survivorship is an incomplete transfer.6 million) in her gross estate. If Warren made a QTIP election. Quinn dies in 2009 when the trust is worth $3.      The purchase of a convertible is a gift. The $6. Did Quinn make a gift in 2005? Explain. The Aunt is not Carl’s dependent. life estate to his wife. and Eve dies in 2012 when the trust is worth $5. surgeon.8 million (1/2 of $5.5 million) which was his share of the community property. The gift result could have been avoided if the medical providers (e. Eve. How much if any is included in Eve’s gross estate in 2012? a. Yes. Note that she was the grantor of only half of the trust (her share of the community property).* Paid a college $13. As the beneficiary of an unmatured insurance policy holds a mere contingent interest.6 million. the transfer of the life estate to Eve is a terminable interest and does not qualify for the marital deduction. as an antenuptial settlement is not recognized by the IRS as being for full and adequate consideration. c. no transfer has occurred. Quinn creates a trust.000 for her room and board. using $2. Eve must include all of the trust ($5. of the trust is included in Quinn’s gross estate in 2009? c.400 for tuition is not [§ 2503(e)].000 for her gallbladder operation.g. How much if any. 45. b.)]. and remainder to their children. Quinn made a gift of a life estate and remainder interest in $1. b. a. In 2005.6 million.000 for room and board is a gift but the $13. none of it is included in his gross estate. As Quinn no longer has any interest in the trust. Unless he makes a QTIP election. A gift has taken pace.25 million (1/2 of $2.6 million) in her gross estate. Eve includes only $2.400 for his niece’s tuition and $6. Unless Quinn made a QTIP election [see part (a.. What are Carl’s taxable gifts for 2012?  Carl’s creation of a revocable trust is not a gift because it is an incomplete transfer.5 million in community property. . The niece is not Curls dependent * Gave his Aunt $22. hospital) had been paid directly.

a. Under the terms of the trust. 57. or a direct skip? b. Gordon and Fawn are brother and sister. Under part (b). Gordon made a gift of $450.50. In 2002. How much of the trust is subject to the GSTT? c. Fawn owns one-half of the real estate b.000) to Fawn.000. Gordon’s estate must include $2.500. the ultimate effect is to reduce what Karl receives. Thus.9 million.000 and listed title to the property as “Gordon and Fawn. Unless the parties provide otherwise. is it caused by a termination event. Wilma dies in 2012 when the trust is worth $9million. a distribution event.500. since Fawn’s estate includes nothing as to the property.000/$6. Who pays the tax? d. would your answer change if it was Fawn (not Gordon) who died in 2012? Explain. and the balance of $4. Presuming that the GSTT applies.000. In 2002.9 million as to the property since he provided all of the original purchase price.000 (1/2 of $900. $4. The trustee elects to use $3million of the generation –skipping transfer tax exemption. What if any.” Gordon predeceases Fawn in 2012 when the real estate is worth $2.000) of the trust. c. joint tenants with right of survivorship. joint tenants are equal owners in the property. Wilma’s death is a termination event. a.000 is subject to the GSTT. . In 2011. c.000. b. Wilma (Marsha’s daughter) is granted a life estate with the remainder passing to Karl (Marsha’s grandson) upon Wilma’s death. Therefore.000. Are the estate tax consequences in 2012? c. Yes.000 is excluded. after the gift. Marsha died. 50% of $9. The exclusion election covered 50% ($3. and her after-tax estate of $6 million passed to a trust. a. Did a gift occur in 202? Explain b. What is the GSTT rate that applies? a. Gordon purchased real estate for $900. Although the trust pays the tax.

d. The maximum rate is 35%. .

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