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Ellen made a large gift to her local college. When figuring the taxes for the gift, her tax preparer would refer to a tax schedule that utilizes:
James made a large gift to his unemployed brother and filed the appropriate gift tax return. However, the actual value of the gift was later held to be two-thirds more than James reported, resulting in an underpayment on the gift tax of $1,100. In this case, what would likely occur?
Jeremy promised to give his son $10,000 if he graduates college within 2 years. Under §2503, would Jeremy’s gift qualify for the annual gift tax exclusion?
Norman would like to give his daughter money for graduate school but the sum would exceed the annual gift tax exclusion. Their tax advisor should explain that §2503 provides an additional gift tax exclusion for certain expenses paid for a donee and exclusion is unlimited for:
Mary is an 80-year-old part-time jeweler. She has a large jewelry collection and has told family members how to distribute it on death. Her advisor strongly suggests a will since it is a legally established document that would include:
Mary meets with her attorney and explains that she would like to draft a simple will. The attorney explains to her that a will can deal with a number of issues but would fail to cover:
Mary explains to her attorney that she would like to use joint tenancy as a method of avoiding probate. However, her attorney points out that avoiding probate would fail to do away with or diminish:
Doug informs his attorney that he does not want to incur the cost of drafting a will. The attorney should inform Doug that state laws determine how individuals’ assets are distributed when they fail to establish a will. What could result from Doug’s decision?
When Albert died he owned property in La Plata County in Colorado, where he lived. He also owned property in Nebraska. How would probate likely be handled in his case?
Jonah has decided to place assets in a revocable living trust during his lifetime. What would he avoid by setting up and funding such a trust?
Brian meets with his attorney to consider a trust and would like the attorney to explain the concept. His attorney should explain that a trust is a legal relationship wherein, upon its establishment, property is transferred to a(n):
When his trust was being drafted, William insisted on being responsible for carrying out the trust terms. As a result, his attorney informs William that in the trust document he will be designated the:
As a tax advisor, Bernard believes that when helping clients select an appropriate trust, it is better to start by asking their reasons for wanting a trust rather than describing all the many types. For example, Bernard would explain that a popular reason for a trust is:
During an in-house staff presentation, you mention that there are four basic elements of every trust. When pressed for details you list these fundamentals as a grantor, a trustee, a beneficiary, and:
Paul’s advisor encourages him to establish a Medicaid trust for his mother and explains that such a trust would primarily attempt to:
Brian has established a grantor retained income trust, which enables him to receive income from the trust for a fixed time period. In addition, this device would enable the remainder interest to:
In a meeting with his attorney, Gary is considering setting up a living trust and would like to know potential detriments to such a trust. His tax advisor points out that a drawback to a living trust would be that:
When Leah’s father died she learned from his attorney that her father left a simple will with a “pour-over” provision. Leah does not know what this means. The attorney explains that this provision:
Brad had created a trust designed to run for the lifetime of his children, and grandchildren. However, following the death of the last grandchild who was alive when Brad died, the “Rule Against Perpetuities” would require that his trust expire after:
Carmen and her business associates are considering a corporation for their design business. Their attorney explains that a corporation would offer the advantages of centralized management, limited liability, and:
Alexa is a single mother and trying to decide whether she should organize her business as an S corporation. Her attorney explains to her that, as an S corporation, she could utilize her business as an estate-planning device, since according to R.R. 71-287, S corporation stock can be held by:
When their partner, Paul, died, the remaining two partners agreed to make a §754 election concerning the basis of Paul’s partnership interest and the partnership property. This election would allow for:
Tanya and Stuart hold property as tenants-in-common. Unlike joint tenancy, how would this allow them to hold interests in the property?
Henry, whose business is organized as a family partnership, can use the partnership to transfer business assets to his heirs, thus removing assets and their future appreciation from his estate. In addition, he would also be able to use this tool to:
Larry is the owner of a growing machine tool manufacturing company and would like to offer his employees a traditional retirement plan. However, as owner of the company, he realizes that the costs of such a plan can be onerous since:
Randy and Judy set up an appointment with you to discuss ways of holding property for their children. Reviewing the Uniform Gifts to Minors Act (UGMA) and the Uniform Transfer to Minors Act (UTMA) in preparation for the conference, you are reminded that the UTMA act specifically allows a custodian to:
A detailed survey of your clientele has disclosed that their major estate planning objective is simple – to pass wealth to heirs. Discussing the survey with staff and other planning members you point out that while life insurance can be used to meet this objective, it is often:
You are attending an estate planning conference sponsored by Metropolitan Life Insurance. The featured speaker explains that life insurance can not only be used to transfer wealth but to pay death taxes and estate settlement expenses. He states that funds used to pay these taxes and expenses are often referred to in the industry as:
Phil had purchased a $50,000 policy on his life and paid five $500 annual premiums before selling the policy to his son, Peter, for $2,500. Peter had paid eight additional $500 annual premiums when Phil suddenly died. When Peter receives the $50,000 in proceeds, how much of that amount would be entirely subject to income tax?
As part of his estate planning, Richard is considering the purchase of life insurance. He consults with his advisor to find out what, if anything can be done to avoid estate taxes on the policy proceeds. His advisor should explain to him that he may be able to do this if:
Michael transferred his life insurance policy to his grandchild, Carrie. He would like to treat the transfer as a gift, making it qualify for the gift tax exclusion. In this instance, the value of the gift would be determined by a prorated portion of the current premium plus:
Alice purchased some term insurance, which can be renewed annually. However, the impact of owning renewable term insurance would be that Alice would face:
Shane is considering whole life insurance but has been focusing on premium costs because she has limited funds. However, her advisor points out that, during coverage, there is an increasing value that can be borrowed or assumed as surrender proceeds and it is called the:
Your client, Joe, would like to establish a life insurance trust. You recommend that, prior to transferring a community property policy to the trust, he should consider converting the policy to his spouse’s separate property. He wants to know why. You explain that such a conversion would:
David is thinking of using a private annuity to transfer real estate to his son, Sean. The property would be exchanged for an unsecured promise to pay a fixed amount over a certain period of time. Traditionally, for how long would these payments be made?
William wants to enter into a buy-sell agreement in order to control is how business interests will be disposed of in the event he dies, or becomes disabled. Which of the following elements is most likely to determine whether such an agreement will be successful?
Dean’s estate owns shares in the family corporation while his daughter, Kristina, owns the rest. Dean’s widow, Gwen, is the sole heir of Dean’s estate. The corporation wants to fully redeem Dean’s shares but can not because of double attribution under family and estate/beneficiary attribution rules. Waiver of the family attribution rule is possible but, what is a term the corporation and the beneficiary must agree to?
Kevin was the owner of a closely-held corporation. When Kevin died, the executor of his estate made sure to conduct a valuation of Kevin’s business interest within the estate. What is one reason for this valuation?
Larry’s estate contains several properties in need of valuation. According to Regulation §20.2031-1(b), the fair market value of these would be determined by two parties who know the relevant facts and are under no compulsion to purchase or sell. These two parties would consist of:
Brenda died owning a closely-held business and her executrix needs to value her business. Under R.R. 59-60, the executrix should adhere to IRS guidelines for the purpose of: