Question 1

Barney creates a trust, income payable to Madison for five years, remainder to Emma. Emma is Barney's daughter and a single parent), and Madison is his 19-year old granddaughter. What might be the justification for this type of trust?

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Question 2

When will the price specified in a buy-sell agreement control the value used for estate tax purposes?

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Question 3

In making a choice as to which assets to use in carrying out a program of lifetime giving, comment on each of the following assets.
a. Installment notes receivable.
b. Property subject to recapture of depreciation.

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Question 4

In arriving at the value of stock in a closely held business, the IRS frequently imputes goodwill. Comment on how the following independent factors would affect the determination of goodwill.

a. Past profits include a large nonoperating gain.
b. Shareholder-employees have not been receiving adequate compensation for their services.
c. The shareholders have been financing corporate operations with interest-free loans.

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Question 5

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.
a. Assets that have declined in value.
b. Land that has appreciated in value.
c. Life insurance policies.

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Question 6

One of the objectives of establishing a program of lifetime giving is to transfer assets that are likely to appreciate in value. Examples include life insurance policies, valuable collections
e.g., art works), vacation homes, and undeveloped real estate. However, such gifts could cause economic problems for certain donees. Explain why.

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Question 7

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

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Question 8

Giselle, a widow, has an extensive investment portfolio that has appreciated in value. Starting this year, she initiates a policy of making annual gifts of securities to her grandchildren who are attending college. Evaluate Giselle's policy in terms of the resulting:
a. Federal gift and estate taxes.
b. Federal income tax.

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Question 9

Robert and Kristen are husband and wife. Ten years ago, they purchased stock for $500,000. Kristen dies before Robert when the property is worth $1,000,000. Assuming the property passes to Robert, what is his income tax basis under the following ownership assumptions?
a. A joint tenancy is involved.
b. Community property is involved.
c. Why are the results different?

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Question 10

In terms of future Federal income and estate tax savings, there are numerous advantages to making lifetime transfers. In this connection, comment on each of the following.
a. Avoiding the tax on future appreciation.
b. The annual exclusions utilized as to gifts.
c. Payment of expenses prior to death.

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Question 11

If the special use valuation method is elected and certain continuing requirements are not satisfied, recapture occurs.
What is the amount of recapture and upon whom is it imposed?

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Question 12

How can a disclaimer by an heir increase the charitable deduction allowed a decedent? Is such a disclaimer always wise? Explain.

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Question 13

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 whether a disclaimer should be made, by whom, and for what amount. Ray died in
2019.
a. Ray's will leaves $12,000,000 to his adult son Tyler and the remainder $500,000) to Amy
Ray's surviving wife).
b. Ray's will leaves $12,000,000 to Amy Ray's surviving wife) and the remainder $3,000,000) to his adult son Tyler.
c. Ray's will leaves $12,000,000 to Amy Ray's surviving spouse) and the remainder $500,000) to the local zoo, a qualified charity.

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Question 14

Using investments worth $3 million, Keith establishes a trust, life estate to Melinda, remainder to Dana.

a. Has Keith made one gift or two gifts?
b. How does your answer affect the Federal transfer tax liabilities?

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Question 15

At the time of his death, Al owned a majority interest in Macaw Corporation, a closely held holding company.
Macaw's major asset is stock in ABC Grocers, a regional supermarket chain. The ABC stock has a per share basis to Macaw of $50 and is currently worth $2,000. In what manner, if any, could these facts have a bearing on the value of the Macaw stock included in Al's gross estate?

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Question 16

Wesley has created an irrevocable trust: life estate to Eve, remainder to Ernest upon Eve's death. In using the IRS
valuation tables, what information is needed to determine the value of Eve's life estate?

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Question 17

What are the advantages of the election to extend the payment of Federal estate taxes when the estate consists largely of an interest in a closely held business?

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Question 18

A well-known artist dies and among her assets is a large number of her unsold paintings. What approach might be taken to lower the value of her estate?

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Quiz 19: Family Tax Planning

Barney creates a trust, income payable to Madison for five years, remainder to Emma. Emma is Barney's daughter and a single parent), and Madison is his 19-year old granddaughter. What might be the justification for this type of trust?

When will the price specified in a buy-sell agreement control the value used for estate tax purposes?

In making a choice as to which assets to use in carrying out a program of lifetime giving, comment on each of the following assets. a. Installment notes receivable. b. Property subject to recapture of depreciation.

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. a. Assets that have declined in value. b. Land that has appreciated in value. c. Life insurance policies.

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

If the special use valuation method is elected and certain continuing requirements are not satisfied, recapture occurs. What is the amount of recapture and upon whom is it imposed?

How can a disclaimer by an heir increase the charitable deduction allowed a decedent? Is such a disclaimer always wise? Explain.

Using investments worth $3 million, Keith establishes a trust, life estate to Melinda, remainder to Dana. a. Has Keith made one gift or two gifts? b. How does your answer affect the Federal transfer tax liabilities?

Wesley has created an irrevocable trust: life estate to Eve, remainder to Ernest upon Eve's death. In using the IRS valuation tables, what information is needed to determine the value of Eve's life estate?

What are the advantages of the election to extend the payment of Federal estate taxes when the estate consists largely of an interest in a closely held business?

A well-known artist dies and among her assets is a large number of her unsold paintings. What approach might be taken to lower the value of her estate?