In the current year, Melanie makes two transfers to Peter, her husband. In June, she gives him land valued at $50,000. In December, she transfers $500,000 to a trust with a bank named as trustee. All income must be paid to Peter monthly for life. At Peter's death, the property passes to their children. Compute the maximum marital deduction assuming Melanie makes the appropriate elections.

Question

Quizplus · Accepted Answer

The maximum marital deduction is the total value of the transfers to Peter, minus the amount of any consideration given by Peter to Melanie for these transfers. In this case, the land transfer in June is not subject to any consideration, so it can be fully deducted. However, the transfer to the trust in December is not considered a direct transfer to Peter, so it is not eligible for the marital deduction.

Therefore, the maximum marital deduction is $50,000 for the land transfer in June. Option A is incorrect as it adds the value of both properties, which is not allowable for the martial deduction as the December transfer is not a direct transfer to Peter. Option C is incorrect as the entire trust amount is not eligible for the marital deduction. Option D is incorrect as the June transfer is only for $50,000.

In the Current Year, Melanie Makes Two Transfers to Peter