Walter passed away this year at the age of 62.
Previously, Walter had structured his will so that his wife would receive $80,000 in cash, and she would also receive his stocks and land to be held in a trust on he behalf. Additionally, Walter's 33 year old son, Steven, would receive a building t be held in a trust until Steven reached the age of 45.
The assets transferred to Walter's wife consist of a piece of land with an ACB of
$100,000 and a FMV of $300,000; and stocks valued at $200,000, with a cost base of $150,000.
The assets transferred to Steven consist of a building with an ACB of $200,000, UCC of $180,000, and a FMV of $300,000.
Required:
What are the tax consequences that will be recognized on Walter's tax return? Show all calculations.
What are the tax consequences for the assets transferred to Walter's wife?
What are the immediate tax consequences from the asset transfers to Walter's son Steven?

Question

Quizplus · Accepted Answer

The Answer is a) Walter:
Walter's estate will have a taxable capital gain of $50,000 and recapture of
$20,000 upon the disposal of the building bequeathed to Steven. Building transferred to Steven's testamentary trust:

a) Walter: Walter's estate will have a taxable capital gain of $50,000 and recapture of $20,000 upon the disposal of the building bequeathed to Steven. Building transferred to Steven's testamentary trust: a) Walter's wife: There will be no tax consequence on the $80,000 cash received by Walter's wife. The other assets will be transferred to a testamentary spousal trust at their tax values, and therefore, there will not be any immediate tax effects. b) Steven: The building will be transferred to a testamentary trust at its FMV. The taxable capital gain and recapture realized on the transfer are taxed in Walter's estate.

a) Walter's wife:
There will be no tax consequence on the $80,000 cash received by Walter's wife.
The other assets will be transferred to a testamentary spousal trust at their tax values, and therefore, there will not be any immediate tax effects.
b) Steven:
The building will be transferred to a testamentary trust at its FMV. The taxable capital gain and recapture realized on the transfer are taxed in Walter's estate.

Walter Passed Away This Year at the Age of 62