Question 1

In 1985, Scott and Dana acquire land for $600,000 with Scott furnishing $200,000 and Dana $400,000 of the purchase price. Title to the property is listed as equal joint tenancy with right of survivorship. Scott dies first in 2011, when the land is worth $3,000,000. What is Dana's income tax basis in the property under each of the following assumptions?

Accepted Answer

The answer of In 1985, Scott and Dana acquire land...

Question 2

Jane is the founder of Citron Corporation and owns all of its stock, both common and preferred. The preferred stock is noncumulative and possesses no preferential rights as to liquidation. In 1996 and when the common stock has a value of $1,200,000, Jane gives it to her adult children. She retains the preferred stock which, at this time, has a value of $300,000. In 2011, Jane dies. Values on the date of death are: $3,000,000 for the common stock and $500,000 for the preferred.

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The answer of Jane is the founder of Citron Corporation...

Question 3

Mel's estate includes a number of notes receivable signed by his daughter, Tammy. These notes were issued by Tammy on different occasions when she obtained funds from Mel. The total face amount of these notes is $150,000. The notes are forgiven by Mel's will. How much, if any, regarding these notes should be included in Mel's gross estate?

Accepted Answer

The answer of Mel's estate includes a number of notes...

Question 4

At the time of her death in 2011, Lila owns 50% of the stock in Kingfisher Corporation, with the balance of the stock held by family members. Kingfisher Corporation's total profits for the past five years are $3,000,000, and the book value of its stock is $2,000,000. If 8% is an appropriate rate of return and goodwill exists, what is a possible value for the stock to be included in Lila's gross estate?

Accepted Answer

The answer of At the time of her death in...

Question 5

Bob and Paige are married and live in a common law state. Bob owns some real estate (fair market value of $624,000) which they would like to give to their six adult married children. The spouses of their children (e.g., son-in-law, daughter-in-law) are to be included in the gifts. Bob and Paige do not want to use any of their unified transfer tax credit. Assuming a constant annual exclusion in the amount of $13,000, suggest a viable way to structure the transfer.

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Question 6

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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The answer of Wesley has created an irrevocable trust: life...

Question 7

Fred and Pearl always have lived in a community property state. At the time of Fred's prior death in 2011, they held stock that cost them $600,000 but was valued as follows.
  Under Fred's will, his half of the stock passes to their daughter, Brandi. What income tax basis will Pearl and Brandi have in the stock, if Fred's estate:

Accepted Answer

The answer of Fred and Pearl always have lived in...

Question 8

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

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Question 9

Joseph makes a gift of securities (basis of $900,000; fair market value of $600,000) to his son, Earl. As a result of the transfer, Joseph paid a gift tax of $90,000. What is Earl's income tax basis in the securities if the gift occurred in 2011?

Accepted Answer

The answer of Joseph makes a gift of securities (basis...

Question 10

Using investments worth $1 million, Roland establishes a trust, life estate to Melinda, remainder to Kim.

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Question 11

Art makes a gift of stock in Drab Corporation, which is not closely held but is traded in an over-the-counter market. The transactions involving this stock that occurred closest to the date of gift took place five trading days before (mean selling price of $120) and six days after (mean selling price of $100). Determine the fair market value of the Drab stock on the date of the gift.

Accepted Answer

The answer of Art makes a gift of stock in...

Question 12

In each of the following independent situations, describe the effect of the disclaimer procedure on Ron's taxable estate. In this regard, advise as to how much should be disclaimed, by whom, and whether a disclaimer should be made. Assume the year involved is 2011.

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The answer of In each of the following independent situations,...

Question 13

Match each statement with the correct choice. Some choices may be used more than once or not used at all.

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The answer of Match each statement with the correct choice....

Question 14

In February 2010, Taylor sold real estate (adjusted basis of $200,000) for $600,000. Under the terms of the sale, the purchaser issued two notes of $300,000 each, payable annually. In January 2011 and when the notes are worth $560,000, Taylor gives the notes to her son. What, if any, are Taylor's tax consequences?

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The answer of In February 2010, Taylor sold real estate...

Question 15

For purposes of § 6166 (i.e., extension of estate tax payments relative to an interest in a closely held business), an interest in a closely held business does not include:

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The answer of For purposes of § 6166 (i.e., extension...

Question 16

Carol inherits her father's farm, and the executor of the estate properly makes a § 2032A election. Five years later, Carol sells the farm. It is determined that the election, which allowed $800,000 in value to be excluded, saved $160,000 in estate taxes. What are Carol's tax options? Tax consequences?

Accepted Answer

The answer of Carol inherits her father's farm, and the...

Question 17

In April 2010, Ed gives his mother, Grace, real estate (basis of $400,000; fair market value of $800,000). Ed paid no Federal gift tax on the transfer. Before Grace's death in March 2011, she makes $40,000 in capital improvements to the property. The real estate is worth $840,000 when Grace dies. What is the income tax basis of the property to Grace's heir under each of the following assumptions?

Accepted Answer

The answer of In April 2010, Ed gives his mother,...

Question 18

Presuming the § 2032A election is properly made in 2011, what value is included in the gross estate in each of the following independent situations?

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Question 19

Abigail makes a gift of stock (basis of $600,000; fair market value of $1,200,000) to her son, Spencer. As a result of the transfer, Abigail paid a gift tax of $120,000. What is Spencer's income tax basis in the stock if the gift occurred in 2011?

Accepted Answer

The answer of Abigail makes a gift of stock (basis...

Question 20

Ingrid's projected adjusted gross estate is as follows.

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The answer of Ingrid's projected adjusted gross estate is as...

Quiz 19: Family Tax Planning