Estate & Gift Tax Questions Flashcards

Question

Azami purchases stock for $100,000. Five years later, the stock is valued at $300,000. Azami gifts the stock to Hans. Azami does not pay any gift tax. What is Hans’s basis in the stock?

Answer 1

Hans's basis in the stock is $100K (1015: donee takes the donor’s basis).

Answer 2

Azami’s holding time is added to Hans’ (1015: donor's holding period time is tacked on to the donee's time because the donee inherited the donor's basis).

Answer 3

Yes, Hans recognizes a $250K LT CG on the sale (1015: donor's holding period time is tacked on to the donee's time because the donee inherited the donor's basis).

Answer 4

Yes, this is fair. The $250K value has never been taxed before. Also, if Hans has any liquidity issues, he can wait to sell it, and then there's no realization event to worry about.

Answer 5

Jennie has a loss, and it is a LT CL of $25K.

Answer 6

Yes, Jennie can recognize her loss because she was the one to originally own the property. Note though that you need to know whether the parties are related to know whether there will be a limitation on losses under 267.

Answer 7

No, he has a basis of $75K, and this is not included in his income.

Answer 8

Michael has a $25K ST CL.

Answer 9

Michael can recognize a $25K ST CL on the sale (if he and Jennie are unrelated).

Answer 10

Michael has a $50K ST CG.

Answer 11

Michael has a $5K LT CG.

Answer 12

There is no gain or loss.

Answer 13

Nothing (102).

Answer 14

Whether Ethel sells the stock for a gain or a loss does matter. Because the stock was worth less than it was when Lucy purchased it, the 1015 exception rules may apply and affect the basis that Ethel will have in the stock when she sells it.

Answer 15

If Ethel sells Blackacre six months later for $50K, her basis will be the FMV at the time of the gift. Her basis is $75K and not $100K because Congress is concerned about people gifting losses and transferring excess value that way.

Answer 16

In this case, there would not be any tacking because Ethel did not take/use Lucy's basis (which was $100K). So, her holding period began when she obtained the property. This would be a holding period of six months.

Answer 17

Ethel has a Short Term Capital Loss of $25K.

Answer 18

Ethel's basis would be $100K (the donor's basis) under 1015.

Answer 19

In this case, tacking applies (as Ethel would use Lucy's basis of $100K), so Ethel's holding period would be five and a half years.

Answer 20

Lucy has a long term capital gain of $25K.

Answer 21

Ethel's basis in Blackacre is the same as the donor's (Lucy's) basis--$100K.

Answer 22

Ethel's holding period in the stock is 5.5 years. Because she takes the same basis as the donor (Lucy), the holding period of the donor tacks onto Ethel's time.

Answer 23

Ethel has a long term capital gain of $25K.

Answer 24

This would be a wash. A sale in the gap between gain basis and loss basis is nothing for income tax basis. SO nothing.

Answer 25

Fred's basis is $50K (1012 cost basis).

Answer 26

Fred has a long term capital gain of $50K. Because Fred's basis is $50k, amount realized is 100k. And more than a year. So part sale part gift. BC FMV was 200k and sold for 100k. So you compute gain based on consideration actually gained. Rest is treated as gift.

Answer 27

Jenna's basis in the stock is 100K (her 1012 basis).

Answer 28

Jenna bought it, so 6 months. Could argue that 100K determined by the gift, but the holding period doesn’t include tacking.

Answer 29

Jenna has a short term capital gain of 150K.

Answer 30

None, because death is not a realization event.

Answer 31

No. Inheritance is a gift, so 102 applies.

Answer 32

$250K. Under 1014, most assets receive a new basis, equal to FMV at decedent’s death--step up in basis.

Answer 33

He has a 50K LT CG. Receipts of property from a decedent are automatically considered long term. 1223(9).

Answer 34

None, because it was a bequest.

Answer 35

It’s community property, so ½ is includable in his probate estate, which is $1M. Special rule in AZ for community property. The entire community property estate ($2m) receives a new basis according to its FMV. 1014(b)(6) provides for this.

Answer 36

Fair Market Value (“FMV”) means the price at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts. FMV is not to be determined by a forced sale price.

Answer 37

The FMV of the securities is used, and this would be the mean of the highest and lowest selling prices on the date of death.

Answer 38

The FMV of the securities is used, and this would be the mean of the highest and lowest selling prices on the date of death.

Answer 39

The 59-60 factors (pg. 73) are used. After the full value is determined, determine the specific interest amount. Apply discounts (like lack of marketability and lack of control).

Answer 40

It is valued by the balance of account on DOD + accrued interest.

Answer 41

It is valued by the balance of account on DOD + accrued interest.

Answer 42

Valued by comparables (use highest and best use, depending on purpose). Look at property similar to ours and adjust as needed. If not appraised, but sold in public market 2 months after death, that should suffice as value.

Answer 43

Retail value is used. If it's a collectable car, you'd want some kind of appraisal.

Answer 44

Retail value if possible. Can use appraisal value.

Answer 45

The replacement cost would be used.

Answer 46

The unpaid principal + the amount of interest accrued to the DOD. May need appraisal. To determine FMV if the interest rate is lower or higher than the prevailing rate, may need to adjust it. Also see if it is unsecured or secured. It's more valuable if secured.

Answer 47

Comparables. Looking at other paintings sold by the artist (can check on websites--look on services that will show sales for the artist.).

Answer 48

Comparables. Items worth less than $100 may be lumped together, and individual items worth more than $3K and collections with an aggregate value exceeding $10K must be appraised.

Answer 49

Hire an expert. They’ll value it based on the production of income of the mineral interest. It'll be a factor of the income being produced.

Answer 50

If it's a breeding or show dog, it may have value, but if it’s a pet, then no value.

Answer 51

Will be valued by the dollar amount that he has. It all needs to be reported.

Answer 52

There are dealers that would value them for you.

Answer 53

The value of the car is the retail value, so $25K.

Answer 54

Thao's basis in the car will be $2K because the general rule applies here that the donee takes the donor's basis.

Answer 55

The shares are publicly traded, so we use the FMV, which would be the mean of the highest and lowest selling prices on the valuation date (20.2031-2). This would be $9.50 per share, so the gift would be worth $19K.

Answer 56

Here, the weighted average formula would be used to determine the worth of the stock. July 4th value would be determined by weighing the July 3rd and July 5th FMVs (20.2512-2). This would result in each share being worth $11.56. So, 11.56 * 2,000 = $23,125.

Answer 57

If 5th circuit, just apply the 7520 rate to the cash flow.

Answer 58

In the 9th circuit or 2nd circuit, the 7520 rate would be applied, and marketability would be taken into account for discount purposes.

Answer 59

First, the entire interest (100%) would be valued using revenue ruling 59-60. Next, these interests would be considered two gifts—a gift of 30% and 40%. Because the two gifts are now considered individually, they have marketability and control discounts applied to them. Had the full 70% been one gift, only a marketability discount would have been applied.

Answer 60

First, the entire interest (100%) would be valued using revenue ruling 59-60. Next, these interests would be considered three gifts—each one being 10% of the entire interest. Because the three gifts are now considered individually, they have marketability and control discounts applied to them. Family attribution rules are not applied—each gift is independent.

Answer 61

As the estate tax rules are applied here, upon Don's death (DOD value), the 100% interest of the company would be valued by applying the revenue ruling 59-60 factors. A lack of marketability discount can be applied, as this is a closely held business. However, a lack of control discount cannot be applied, because we're valuing what Don owns, not the interest of those who receive it.

Answer 62

The QTIP was never part of her estate. Courts say that the 30% and the 40% are separate gifts, so they have marketability (assuming the company isn't publicly traded) and control discounts applied to them.

Answer 63

Boris has made a gift of $100K. More information is needed to determine whether Boris has made a gift. We would need to know whether Boris received anything in return.

Answer 64

The list price is not necessarily indicative of FMV. This seems to be in the ordinary course of business and so qualify for the Business Transaction Exception. Seems to be bona fide, at arm’s length, and free of donative intent.

Answer 65

As family is involved, it doesn't seem like this is in the ordinary course of business. Still, the FMV of what was transferred and received should be considered.

Answer 66

The FMV needs to be determined (this would be retail value). If the retail value was 15K, then this is fine. Otherwise, it would need to be determined whether the transaction (1) was at arms-length, (2) had bona fide (real) intent, (3) was free from donative intent, and (4) was in the ordinary course of business.

Answer 67

This does not seem to be a bona fide transaction. A real purchaser would want the title in their name. They would want a contract, a bill of sale--SOMETHING.

Answer 68

The negotiation indicates that it was an arms-length transaction. This is how strangers would negotiate the price. Because of the details of the negotiation, this transaction seems to be free from donative intent.

Answer 69

Vince made a gift of $375K. The transferred property's value was $500K and he increased the value of his own share as well by $125K. NOTE: This is a common type of transaction.

Answer 70

To show that this is not a gift, Vince has to satisfy the Chapter 14 rules, otherwise the transaction isn’t honored. It is very difficult to have a buy-sell agreement honored that has a fixed price.

Answer 71

Here, similar to Anderson, Vince needs to meet the requirements of 2703. However, in Anderson, there was a business purpose (transferring ownership to young replacementsto create incentives which would benefit the business). Here, Vince probably can't show that there was a business purpose, so this will likely be a gift of $250K.

Answer 72

Vince would need to show that the 2703(b) exception language applies. Namely, that the buy-sell agreement is: (1) A bona fide business arrangement, (2) Not a device to transfer property to the members of the family at less than full and adequate consideration in money or money's worth, and (3) Comparable to arrangements made by parties in an arms-length transaction.

Answer 73

I would need to know (1) whether this is a bona fide business arrangement, (2) their relationship (are they family?), and (3) whether the transaction is comparable to other arrangements entered into at arm's length. 2703(b).

Answer 74

Almost certainly, yes. This doesn't seem to be at arm's length. Each is likely a gift of $60K.

Answer 75

This is a part-sale part-gift. The amount of the gift would be computed based on Rev. Ruling 75-72 (Tentative Tax (the tax that would be due if the gift were not a net gift) / 1 + [rate of tax] = True Tax (amount of tax due)). 750 * .4 = 300K (tentative tax) 300K / 1.4 = $214,285.71 (amount that Elijah is paying). The value from Roxanne to Elijah is $750K and the value from Elijah to Roxanne is ~$214,286. The difference is the gift. The gift is ~$535,714. Elijah's basis in the gift is Roxanne's amount realized (~$214K). Roxanne's basis was $50K and she received the value of ~$214K, so she has a gain of $164K.

Answer 76

Trisha has made a $2M gift to Mauricio. Although Trisha is receiving a form of "consideration" through Mauricio's decision to not be a lobbyist anymore, this value isn't consideration in money or money's worth. If Tisha decides not to pay the $2M, Mauricio will likely have a valid contract claim under state law, but this doesn't make the amount consideration in money or money's worth for gift tax purposes.

Answer 77

The value of the services rendered would be compared to the value of the house to determine whether the house's value is offset. What's the value of the services (If she had to pay someone else, her estate would be depleted by the amount of those costs, so, credit is given for the value of those services). For Kay, she is rendering services and receiving consideration, so the amount that she receives as consideration for rendered services is taxable income.

Answer 78

This is very likely a gift. It's looking like a gift because the services that are supposed to be performed (housework and maintenance) are non-existent.

Answer 79

Clarence's lost income doesn't provide an objective benefit to Tricia, so this would be a gift of $3M (See Wemyss).

Answer 80

This would be a $3M gift from Tricia to Clarence. Clarence's release of marital rights is not enough to be consideration for Gift Tax purposes (See Merrill).

Answer 81

The release of support rights has value. The gift is offset by the consideration of the release of support rights to determine the gift (the gift is the difference between the consideration and the support rights).

Answer 82

Although these are expensive shoes, this is almost certainly a discharge of a support obligations, and so not a gift.

Answer 83

Probably not a gift, as this is likely a discharge of support obligations

Answer 84

This is likely a gift (probably more than a discharge of support obligations).

Answer 85

This is a gift (the child is over 18)

Answer 86

Yes, this is a gift. While this is likely a valid contract under state law, for gift tax purposes, this is not adequate and full consideration in money or money's worth.

Answer 87

Ramona has not made a gift, due to the educational exclusion under 2503(e).

Answer 88

Ramona has not made a gift, due to the educational exclusion under 2503(e). 2503(e) applies to everyone--it doesn't have to be family.

Answer 89

Ramona has made a taxable gift of the amount(s) that she sends to her daughter. The amounts need to be paid directly to the school for the 2503(e) educational exclusion to apply.

Answer 90

Ramona has made a taxable gifts in the amount of these items. The 2503(e) educational exclusion only applies to money paid directly to the educational institution.

Answer 91

The payments to the school are excluded under 2503(e), but the other items are not excluded, and are therefore taxable gifts.

Answer 92

This will not qualify for the gift tax exclusion. The gift needs to be directly from the donor to the educational institution for 2503(e) to apply, and the trust disrupts that. Walton and Lana could have used a 529 account, which is tax-advantaged, as it allows the money to grow income-tax free. You can "superfund" these with 5 years-worth of annual exclusions. Remember that above that $17K will be a taxable gift, as it doesn't qualify for the 2503(e) exclusion.

Answer 93

Yes, prepayments are still excluded under 2503(e).

Answer 94

The value of what Lincoln has transferred and what he has received in return needs to be compared to determine whether (and how much) gift tax is owed. Love and affection has no value for gift tax purposes. However much went out and didn’t come back in needs to be reported. Flora will have income taxes on the value that she gets for the services that she provided.

Answer 95

The income interest is not a taxable gift, as it is excluded under 2516 (settlement of marital property or rights). The remainder interest is a taxable gift, as it is not covered under 2516 since it wasn't part of the settlement.

Answer 96

(1) You would compute the interest under 7872(a) (interest rate in effect on the date of the loan), and the amount of the forgone interest is a taxable gift. (2) Under 7872(a), the forgone interest is considered to go from Terrence back to Curtis, and this is considered to be interest income to Curtis, and Curtis needs to pay income taxes on that interest.

Answer 97

The CD rate doesn't matter. If the interest here is at or above the rate provided in 7872, then there will be no gift tax consequences (if it's below, then there will be forgone interest, and this will be subject to the gift tax, and will be considered going back to the donor as income interest). If loaning to Bernard, the same analysis would apply. Relationship doesn't change anything.

Answer 98

Services aren’t a gift for gift tax purposes (they're not property).

Answer 99

Rolland has not made a gift unless he actually has to pay. There may be some economic benefit to the daughters here, but this isn't considered a gift for gift tax purposes. It's not a transfer of property at that point in time.

Answer 100

[1] Yes, this is a gift, as it is beneficial use of property. [2] This might change how much we value the gift at. We would need to determine how much value is being provided to Alma (remember that it might be different than what she would value it at).

Answer 101

This is technically considered a taxable gift because there’s no legal obligation of support and there’s provision of food and other necessities to a child over the age of 18. No one would actually report this though.

Answer 102

Serena has not transferred property. She has transferred ideas. If there were patents or copyright on those ideas then it would be property, but ideas alone are not a transfer of property. Serena has not made a taxable gift, as personal services are not subject to the gift tax.

Answer 103

It depends on whether the transfer of the practice includes transfer of the property. She may have transferred goodwill, which is also a gift. Gwen received something in return: a release from her obligations to take care of the case files. Professor Becker thinks that this is a wash (the end result has a negligible advantage or disadvantage).

Answer 104

No. Personal guarantee obligations are not a gift. He transferred his name, and while that and his credit history have value, in practice, this situation has never been taxed as a gift. Note that if he was actually called upon to pay, then that would be a gift.

Answer 105

No. The shares were held as an accommodation—almost as a fiduciary. If in the future, Reed was asked to return the shares and Reed refused, Gwen could force the return of the shares. Transfer 1: he formed the company and gave Gwen 49%. Transfer 2: Reed returned the 51% when Gwen's credit was better. The retention of 51% and its subsequent transfer to Gwen is NOT a gift because Gwen furnished the consideration for it (so Reed was holding it as an accomodation--almost as a fiduciary).

Answer 106

No. This is an “equitable charge” (property is transferred to one party on the condition that that party transfer property to a third party). This is not considered a gift by the secondary part to the third party, but rather is considered a gift from the first person to the third party. So, it is Jeremy who has made a gift to Bruce AND has made a gift to Brandie.

Answer 107

Yes. This is an “equitable charge” (property is transferred to one party on the condition that that party transfer property to a third party). This is not considered a gift by the secondary part to the third party, but rather is considered a gift from the first person to the third party. So, it is Jeremy who has made a gift to Bruce AND has made a gift to Brandie.

Answer 108

Yes, but his disclaimer must comply with 2518(b). If he disclaims, his interest will pass according to the terms of the will, which is to his children, so this would satisfy the disclaimer requirements and get the property to where he wants it.

Answer 109

Chad would have to pay gift taxes on the property if he inherited the property and then gave it to his kids during his life. By disclaiming, he would be moving assets down and avoid gift taxes (though remember GST taxes). Also, if Chad has a creditor or expects to have creditors, he can disclaim, and the creditors can’t reach the property.

Answer 110

Chad must meet the 2518(b) requirements. (1) be irrevocable and unqualified; (2) Be written; (3) Have that writing be received by the transferor (or here, their legal representative) within 9 months of the creation of the interest (DOD); (4) Not accept the property interest or any of its benefits; (5) Not affect the passage of the property.

Answer 111

Ordinarily, this would fall into the residue, unless a substitute gift is created under state law. We would need to know what happens under state law. In AZ, a substitute gift would be created because of the relationship (14-2603).

Answer 112

Yes, partial disclaimers are allowed.

Answer 113

Yes, as long as the property is severable (can be separated into parts).

Answer 114

The interest in the stock portfolio would be considered a failed devise, and so would pass into the residue. She disclaimed the interest in the stock portfolio, but not the interest into the residue, so she has retained an interest. Thus, this disclaimer would be no good! She would need to disclaim the stock portfolio interest AND her interest in the residue to not have the property in her estate. She could go into the grey area by disclaiming the stock portfolio interest AND any part of the residue attributable to the stock portfolio (accepting other parts of the residue).

Answer 115

No, because all the disclaimers relate back to the creation of the interest, so the nine month window has passed for Jordan (even though Gaston left him no time to disclaim). The creation of the initial interest is the creation of the interest for 2518 (in this case, the death).

Answer 116

No, creation of the interest was in 2005, when the trust was created. The nine months has passed since the creation of that interest (2518).

Answer 117

Yes. Under 2518, someone has nine months after they turn 21 to make a disclaimer. NOTE: the age is 21 and not 18 because the age of maturity used to be 21 and was subsequently lowered, but the IRC hasn’t changed on that front yet.

Answer 118

If Harriett disclaims within 9 months of Claire’s death, this will change the ownership into tenants in common. She would retain her half and the other half would go according to the instrument / state law (she retains her half and she is disclaiming the other half that is coming to her).

Answer 119

No. This is a property interest that isn’t divisible. Can't just assign income.

Answer 120

Yes, but he would also need to disclaim the remainder interest, otherwise, he will be getting half of that income via his remainder interest.

Answer 121

Yes, a gift of $25,000. In AZ, the property interests are based in contributory interests (parties own an account in proportion to their net contribution). The gift is complete when Leopold makes the withdrawal, because before that point, Esperanza could merely take the money out (she still has the power to change its disposition).

Answer 122

This is a completed gift. When it is complete depends on state law, but it would generally be the earlier of (1) when he delivers the deed to Mariana or (2) when the deed is recorded.

Answer 123

This is a completed gift. When it is complete depends on state law, but the gift is usually complete on the earlier of (1) when he delivers the deed to Eva or (2) when the deed is recorded. So here, it’s the 1st of September because that’s when he gave the deed to Eva.

Answer 124

Florian made a transfer of property to Hiro. The creation of the corporation is a transfer of property. Florian gifted the first 49 shares in 2013. Florian likely gifted the remaining 51 shares in 2014. In 2014, he wrote a letter saying that he had no ownership interest and that he’s holding the shares for Hiro. If this is a valid contract, then he’s holding the shares in a fiduciary capacity, so (Professor Becker thinks that) 2014 is when the gift was completed.

Answer 125

On March 6, 2015. Not a gift until it clears the bank account.

Answer 126

Ernest and Frankie have an enforceable contract. Performance is acceptance (enforceable after the two years of not smoking are complete). Ernest has made a gift to Frankie. There is consideration for the contract (not smoking), but it is not consideration in money or money’s worth. The gift is complete when Frankie completes performance on April 15, 2015.

Answer 127

The gift is complete on the date the performance is completed—April 15, 2015. It doesn't matter when he sends the check.

Answer 128

Her gift is complete on December 29, 2022 (Rev. Ruling 96-56).

Answer 129

Her gift is complete on January 2. This matters because now it’s counts towards the 2023 gift tax exclusion, which is a problem from a tax planning standpoint.

Answer 130

The relation back rule doesn’t apply because the donor has to be alive for the rule to apply.

Answer 131

Use a cashier’s check. Hand the cashier's check to the donee (it's complete when delivered).

Answer 132

On February 25, 2015, as that is the date on which the gift was complete. There’s no reliance on consideration of a contract—this is just a promise to make a gift and is not legally enforceable.

Answer 133

Jim made a completed gift on March 5, 2015. The October event was just a promise to make a gift and is not legally enforceable.

Answer 134

Luca's gift is complete—both the income and remainder interest. The remainder interest and the income interest are valued by means of the code’s actuarial tables (the 7520 rate).

Answer 135

The income interest is a gift, but the remainder interest is not. The value coming back to Luca isn’t a gift because you can’t make a gift to yourself.

Answer 136

Elsa's gift is not complete. She hasn’t given up any dominion/control. She can take it back at any time. As a matter of policy, the revocable trust should not be subject to gift tax because these are used for estate planning purposes as substitutes for wills—we don’t want to subject revocable trusts to gift taxes because they wouldn’t be able to be effectively used as estate planning devices in the place of wills (you’d exhaust your exemption and make people not want to use this great device).

Answer 137

Reiko has not made a completed gift. This is because she hasn’t departed with dominion and control of the property (she can still give the property to herself or others).

Answer 138

She’s made a completed gift of the income interest, but not of the remainder interest.

Answer 139

The consent doesn’t change anything (Henri has no interest), so the gift is incomplete.

Answer 140

Henri has a substantial and adverse interest (because changing the beneficiary would mean taking something from him), so the remainder interest is complete. The income interest is still incomplete because this beneficiary can still be changed.

Answer 141

Income interest: if she doesn’t distribute the income, it goes to the remainderman, so this is not a completed gift (because she can alter it—take from the income bene and give to the remainder bene). Remainder interest: The remainder will still go to the remainderman regardless of her choices about income distributions, so it is a completed gift.

Answer 142

Income Interest: Reiko can't change the income beneficiary, so the income interest is considered completed. Remainder Interest: Reiko can dip into the trust principal, but this is limited by an ascertainable standard—discretion considered to be eliminated), so this gift is complete.

Answer 143

Yes, for both the income and remainder interests. Rosa has a substantial and adverse interest to the change of the income interest, and Boyle retained no right to change the remainder.

Answer 144

Income interest: The income interest is complete because Gina has a substantial and adverse interest. Remainder Interest: Rosa has no interest in the remainder, so because Boyle can change this interest without Rosa having a substantial and adverse interest, the gift is incomplete.

Answer 145

Yes, for both income and remainder interests, because Rosa has a substantially adverse interest to this happening.

Answer 146

Income Interest: This is an incomplete gift because he can choose between the two (can effectively modify the beneficiaries). Remainder Interest: This is a complete gift because he can’t change it (it’s only Yuma or Yuma’s estate that will receive the remainder depending on if Yuma’s alive).

Answer 147

Income Interest: It’s a completed gift because Salvatore retains no power to modify the remainder interest. Remainder Interest: It’s a completed gift because emergency is an objective standard like HEMS. Reg 25.2511-1(g)(2) refers to an emergency as being ascertainable.

Answer 148

Remainder Interest: The remainder interest is an incomplete gift because comfort and happiness is not an ascertainable standard. Income Interest: The income interest is still complete.

Answer 149

When she records the deed or delivers the deed (whichever is earlier).

Answer 150

Gift Amount: Candice has made a gift of $50K (the difference between the FMV and the consideration received). Candice's Gain: Gain of $30K. Probably LT CG. NOTE: no tacking because her basis is based on the consideration that she paid (she's not receiving Candice's basis).

Answer 151

Candice has not made a gift so long as there is no agreement/understanding that there aren’t going to be subsequent forgiving of the amounts owed. The intent makes a big difference. The initial loan is very likely not a gift. Each forgiven payment is a gift when it is forgiven, but is not taxable due to the annual exclusion.

Answer 152

Yes, Candice made a gift at the outset of the transaction ($100,000).

Answer 153

Transaction 1: when we don’t have adequate interest, a computation is done of the interest that should have been charged, and that’s considered to be a gift (IRC 7872). Patrick has transferred the amount of the non-charged interest to Richie, and that’s a gift for gift tax purposes. Transaction 2: Patrick is treated as having returned the amount back to Ritchie, so Ritchie has taxable income of that amount.

Answer 154

We would need to compare this interest rate with the applicable federal rate. If that rate is higher, than the difference between the two is the value of the gift (in the form of non-charged interest, which then in turn is treated as income to Richie for income tax purposes under 7872).

Answer 155

Richie makes a gift in the amount of each payment as they come due (this seems to be an arm’s length transaction and structured in a bona fide manner).

Answer 156

This is a gift (with a present interest, so a present interest gift), but it qualifies for the annual exclusion, so it is not a taxable gift.

Answer 157

Yes, this is a $3,000 taxable gift.

Answer 158

No. Outright gifts between spouses qualify for the unlimited marital deduction under 2523.

Answer 159

If Wendy agrees, the gift isn’t taxable because both would be making a 17K gift (2513).

Answer 160

They've already used up their exclusion amounts. They would need to split the new gifts too, so both Lucky and Wendy will be $17K over the limit.

Answer 161

The 34K qualifies for the marital deduction, and in this case we’re not splitting gifts, so the 17K both qualify for the annual exclusion. No tax liability here. This is an alternative to using 2513.

Answer 162

Yes, because in order to split gifts, the spouses must be married at the time of the gift.

Answer 163

$3,000 is taxable.

Answer 164

This looks like it was orchestrated to go to the nieces and nephews and then to Ted (looks too much like an agreement or understanding), so this doesn’t work. “Old and cold.” If it were done earlier in the year and then everyone later transferred the amounts to Ted for other reasons (they really like Ted, he does a lot with the company, etc.), then it might be okay. This would be a taxable gift.

Answer 165

There would be no gift tax consequences, as all of them would have the exclusion applied to them.

Answer 166

This is suspicious—it seems like a scheme (gifting to each other’s children). May run into the reciprocal trust doctrine. Needs to be old and cold—needs to be spaced out more. Professor Becker ultimately thinks that this should be fine, but it is definitely a suspicious transaction.

Answer 167

This is not a taxable gift, but this is a bad transaction. Should put into an LLC so that not all 16 need to agree on a sale of property.

Answer 168

If you don’t assess the situation on an annual basis and forgive based on that (i.e. if you have an agreement to forgive the payments as they come in), then that outstanding amount at the outset is a gift. This looks problematic.

Answer 169

Yes. There’s no restriction on the immediate use, possession, or enjoyment of the property. Present interest.

Answer 170

Production of income is NOT a requirement for it to be a present interest gift. This qualifies for annual exclusion.

Answer 171

It depends on the facts and circumstances (what the interest looks like). A limited partnership interest means that there’s a lot less that you can do with it. For example, in Hackle, there were too many restrictions on it, such that it wasn't a present interest. We don't have facts here on restrictions of this interest, so this likely qualifies as a present interest.

Answer 172

Yes. She has the right to the property and do what she wants with it (like sell the policy).

Answer 173

A transfer to a trust is generally a future interest. She doesn’t have the unrestricted right to the immediate use, possession, or enjoyment. If she had a Crummey withdrawal right (considered a GPOA), this would be a present interest gift.

Answer 174

Yes, because Cleo is able to control the insurance (it’s her property). Raymond is making gifts in the form of those premium payments. They are gifts of a present interest, and up to $17K, they aren't taxable.

Answer 175

All five have benefited from the gift, so it is a gift to all 5. They don’t have unrestricted right to the property, so it is not a present interest gift. This is because if they disagree, they can't control the property.

Answer 176

This is not a gift of a present interest, so he gets ZERO annual exclusions.

Answer 177

No, because you can’t make a gift to yourself.

Answer 178

Income: There are no restrictions (including that the trustee cannot choose to accumulate income). Here, the income interest would be considered a gift of a present interest. Need more facts though on the income interest. Remainder: The remainder interest is ALWAYS a future interest.

Answer 179

Income: There is a restriction on income here (trustee has complete discretion on whether to distribute)—it would be a future interest. Remainder: The remainder interest is ALWAYS a future interest.

Answer 180

Income: This would be a presenting interest. The facts don’t suggest that the trustee has discretion to accumulate income or is otherwise not required to distribute. Remainder: The remainder interest is ALWAYS a future interest.

Answer 181

Income: None of these would be a present interest. Remainder: The remainder interest is ALWAYS a future interest.

Answer 182

Income: Because the trustee has the discretion to accumulate, it’s not a present interest because of that discretion (even though there’s an ascertainable standard). Remainder: The remainder interest is ALWAYS a future interest.

Answer 183

No. There must be payments from an income interest at least annually for it to qualify as a present interest (mandatory payments + produce income + interest of each bene capable of being valued.

Answer 184

Yes. Even though the payments are going to be received in the future, the note itself is a present interest gift.

Answer 185

PRO(S): Easier. 17K each qualifies for the annual exclusion. CON(S): They’re all under 18, so it's very impractical to making outright gifts to them. Shouldn’t be done. Also, do you want someone that age to have that kind of money?

Answer 186

PRO(S): Child wouldn’t have access—an adult would be handing it. Would be okay for gift tax purposes. CON(S): conservators are horribly expensive. Multiple attorneys involved and it’s on an annual basis with annual accountings and filings. Also, when the minor becomes an adult at 18, the money is turned over to them outright.

Answer 187

PRO(S): Work in every state. It’s usually the parent, so less expensive. CON(S): at age 21 (or 18, depending on the state), this terminates and the funds become the child’s.

Answer 188

PRO(S): safe, statutory, and there's a present interest if the bene has a GPOA. CON(S): Need to make sure that child has a GPOA. Terminates (or child must have right to terminate) at age 21. There needs to be a separate trust for each minor—makes it more expensive.

Answer 189

PRO(S): Take advantage of exclusion. You just need one trust, which saves money. Keeps going after the age of 21. CON(S): could demand the gift. Also has a transaction cost (drafting the trust, providing notice, etc.).

Answer 190

2503(c): She needs to create a trust for each grandchild. Crummey: Only need to do one trust here, so it’s the less expensive option.

Answer 191

Crummey trust—doesn’t terminate at 21 and only one is needed. Best option.

Answer 192

It’s a completed gift. The income interest is a present interest gift. Note that each $17k payment has both an income and a principal component.

Answer 193

No. There would be no unrestricted right to the immediate use, possession, or enjoyment of the income.

Answer 194

Type of Power: Silas has a Crummey power, which is a GPOA. Present Interest: It is a gift of a present interest, because Silas is able to withdraw the money. It’s a present interest. Gift Tax Consequences: He’s the only beneficiary, so there are no consequences. If there were other people to take the money when he didn’t, then there would be a problem (because by not taking your share, you may be making a gift to the other beneficiaries—Hanging Crummey powers are used to remedy this).

Answer 195

This doesn't qualify for the annual exclusion. There is no Crummey withdrawal power. Furthermore, under 2503(c), the trust corpus is supposed to go to Charles’ estate (but here, it would go to Marsha). Violates 2503(c).

Answer 196

This doesn't qualify for the annual exclusion. There is no Crummey withdrawal power. Furthermore, under 2503(c), the trust corpus is supposed to go to Charles’ estate (but here, it would go to Charles' heirs at law). Violates 2503(c).

Answer 197

Yes, because here, the donee has the power to appoint the property under a GPOA. It's okay that there is a taker in default. Qualifies under 2503(c).

Answer 198

This is a Crummey trust because they have the power to withdraw and then the power lapses.

Answer 199

Yes. There is a Crummey withdrawal right for two children, so this covers the $34K.

Answer 200

Yes, so that taxable gift is 26K.

Answer 201

This is fine. It’s 17K X 6. As long as they have the withdrawal power, it’s fine (like the Cristofoni case).

Answer 202

There is no limit to the amount of Crummey powers that can be created, however, this is concerning. The cousins have no incentive NOT to withdraw here. Ultimately, assuming that these Crummey powers are fine, Ren has not made a taxable gift.

Answer 203

This doesn't qualify. The power holder needs to know about it (best practices is to send a Crummey letter and have them sign it).

Answer 204

This is included in Tabitha's estate. It is a probate asset, as it is in her name. For valuation, the FMV definition is used, and the house would be valued at best and highest use—we generally use comparables. If we sell it in the open market, we can use that price for valuation. Otherwise, we need it appraised. The offer and purchase price are immaterial.

Answer 205

This is included in Tabitha's estate. The estate tax is a tax on worldwide assets. If the treaties between the countries don’t tell us, then presumption is 50/50 for each country (equal shares). So, the condominium is valued at 50% of FMV at time of death.

Answer 206

This is included in Tabitha's estate. The apartment would be valued by an appraiser, and they might capitalize the income or they might calculate based on replacement costs. Depreciation deductions have nothing to do with the value (red herring).

Answer 207

Yes, this is included as a probate asset. To value it, engage an expert that sells sailboats (a dealer in sailboats)—get the retail value in the public market.

Answer 208

Yes, these are included in her estate as probate assets (and includes any dividends paid). They would be valued by the mean between the high and the low on the DOD. If the DOD is over a weekend, you have to weight the days.

Answer 209

Yes, this is included as a probate asset (and includes any dividends paid). To establish value, use the 59-60 factors. For discounts, you would apply a lack of marketability discount, and since it’s 20%, a minority interest discount.

Answer 210

Yes, the FMV of the bonds are included in the estate. FMV is generally determined by a computer program that takes into account the change in interest on the bond—include the accrued interest up to the DOD as well.

Answer 211

Yes, it is included in her gross estate. The value would be based on the account balance on the DOD. Any interest accrued up to the DOD is included.

Answer 212

Yes, it is included in her gross estate. The value would be based on the account balance on the DOD. Any interest accrued up to the DOD is included.

Answer 213

Yes, it is included in her gross estate. The value would be based on the account balance on the DOD. Any interest accrued up to the DOD is included.

Answer 214

Not included. RULE: if it’s one cemetery plot and the decedent is going to be buried in it, you don’t have to include it (because you can take a deduction for funeral expenses)—the IRS allows you to exclude the plot.

Answer 215

Yes, these are included in her gross estate. 20.2031-6 (which hasn’t been updated for decades) would be used for valuation. It allows the itemization of items (Items worth less than $100 can be grouped; Individual items worth more than $3000 and collections with aggregate value exceeding $10,000 must be appraised).

Answer 216

Yes, it is included in her gross estate. To value, could get it appraised or use the price of a public auction.

Answer 217

Yes, this is included in her gross estate. To value, it would need to be appraised, (and insurance value is not indicative of the value).

Answer 218

No, not included (unless they’re valuable for breeding or other purposes).

Answer 219

Yes, included, though you need to pay income taxes on this also (691(c) tries to mitigate this but isn’t very effective).

Answer 220

Was there a contractual right to the bonus at death? If yes, part of estate. If it’s not contractual, then it’s not includable. If purely discretionary and awarded after death, not included.

Answer 221

If she had a contractual right to those payments, then they are includible in her gross estate (if they were due by date of death). If due after the date of death, then they're not includuble.

Answer 222

No. The amount for pain and suffering is includable in the estate, but the rest is not.

Answer 223

Yes, this is included. She sued before she died, and this created a property interest. To value, engage an attorney to do an analysis of the case to determine the likelihood of recovery and multiply that by the worth of the suit.

Answer 224

She has contractual right to the fee, which is a property interest. We value it through an appraiser (probably a plaintiff’s attorney) to opine. Can’t consider post-death facts. Also consider the fact that just because you have a settlement, it doesn’t mean that you’ll get paid (collectability is considered).

Answer 225

She has contractual right to the fee, which is a property interest. We value it through an appraiser (probably a plaintiff’s attorney) to opine. Can’t consider post-death facts. Also consider the fact that just because you have a settlement/judgment, it doesn’t mean that you’ll get paid (collectability is considered).

Answer 226

Fairly little value should be included, since not much work has been done, and post-death events aren’t considered.

Answer 227

Yes, includable. ANALYSIS: look at the DOD value of the checking account and look to see if you can take a deduction for the outstanding checks. You CANNOT here, because they are gift checks and haven’t cleared (it they’re outstanding, you get no deduction). THIS DOESN’T WORK—not by facts and circumstances, this is a bright-line rule.

Answer 228

The check amounts are includable in Jenny's gross estate.

Answer 229

Yes, the check amounts are includable in Jenny's gross estate. The relation-back doctrine doesn't apply because she was dead by the time the check cleared.

Answer 230

The note could be worth something if it was secured or had a term—concern is that $25K was transferred out, and what was received back isn't worth $25K. It’s includable in her gross estate. If it wasn't a gift (and thus includible), you would determine accrued interest and add that to the outstanding principal.

Answer 231

The note is included in her estate in the amount of the outstanding principal + the interest not yet paid.

Answer 232

The promissory note would be included in the gross estate.

Answer 233

The promissory note would be included in the gross estate. She is gifting the value to Aaron via the debt forgiveness.

Answer 234

Very likely not included in her estate. This looks like a gift—$25K went out, and what came back in is just an oral promise, which doesn’t seem to have value.

Answer 235

Kurt's property interest is in the income interest (he has a life estate). For estate tax purposes, the amount that he received in the form of income is part of his tax base and so is another asset. There’s no interest for estate tax purposes because there’s nothing he can transfer (this is the case for life estate, as it expires at death).

Answer 236

His interest is in the remainder (he has a life estate, but this is not included), over which he has a GPOA. This means that the value of the property that he controls is subject to the estate tax, whether he uses the power or not.

Answer 237

Kurt has a vested remainder interest, because it either goes to him or his estate—he can control it either way. The value of the vested remainder interest would be in his estate. It would be valued based on the life expectancy of the living income beneficiaries and what this will mean for the trust corpus’ value.

Answer 238

Kurt has a contingent remainder interest (contingent upon whether Jennie predeceases Diane). His interest is includable. It should be valued by an appraiser, who will look at Jennie and Diane’s life expectancies to determine what the interest is worth to Kurt (NOTE: remember that post-death events are not considered).

Answer 239

Yes, there is probably inclusion. To establish a putative shareholder’s claim to ownership, the following must be shown: (1) The individual must have had an intent at least at one time to become a shareholder, (2) The individual must have taken action to follow through on that intent usually through the contribution of cash or property to acquire the ownership interest, and (3) The corporation intended to make the shareholder an owner. It's clear that she and the company intended for her to be an owner. How the income was received and reported is evidence of the ownership (and Professor Becker says that the most important thing is how they reported the income).

Answer 240

All of the assets are included in Walter's gross estate. So, $5.7M is subject to the estate tax.

Answer 241

A gift is complete when (1) the donor has so parted with dominion and control (2) as to leave in him no power to change its disposition, whether for his own benefit or the benefit of another. So, this happened here when the deed is recorded or giving them the deed—whichever is earlier. Pete & Mitchel have an unrestricted right to use or sell their interest in the property (immediate use). This qualifies as a present interest.

Answer 242

There are no words of survivorship, so the presumption is that they are equal tenants in common (doesn't say otherwise). 50% should be included (since we’re assuming that they’re tenants in common). Discount because the 50% isn’t worth as much as it would be valued if they had the other 50.

Answer 243

This is a present interest gift, so yes.

Answer 244

When joint tenancy originates with someone else (as here with Mom), upon the death of one of them, their proportionate interest is included in their estate, which is ½ here (2040(a)).

Answer 245

Yes (for Pete and Mitchel). There’s no restriction against transferability, and they have full use and enjoyment of the property interest, so they have a present interest. Thus, it qualifies.

Answer 246

There is no gift on the sale (if they all received their proportionate interests).

Answer 247

There is a gift on the sale because Tara is entitled to $50K of the sale, so in not taking anything, Tara made a gift of $25K to each of them.

Answer 248

This is a gift. Both have a ½ interest, so it’s a gift of $50K. They have immediate use and enjoyment, so it qualifies for the annual exclusion ($17K is excluded).

Answer 249

The presumption is that 100% is includable in the estate of the first to pass away, except to extent that they can show that the other furnished consideration. As that can’t show here, it will all be included.

Answer 250

The presumption is that 100% is includable in the estate of the first to pass away, except to extent that they can show that the other furnished consideration. However, as Julie should be able to show that Homer furnished everything, none of the value should be included in her estate.

Answer 251

This is a gift of $25K from Homer to Julie, and it qualifies for the annual exclusion ($17K).

Answer 252

The presumption is that 100% is includable in the estate of the first to pass away, except to extent that they can show that the other furnished consideration. However, as Homer should be able to show that Julie furnished 25% of the cost, he should be entitled to exclude $50K. The amount included is $150K.

Answer 253

The amount excluded would be $150K, and the amount included would be $50K.

Answer 254

½ of the interest is included, so $50K. The community property info is a red herring. Under 2040(b), with joint tenancies between married couples, it doesn’t matter who furnished the consideration, just ½ value is included in the deceased spouse's estate.

Answer 255

½ of the interest is included, so $50K. The common law property info is a red herring. Under 2040(b), with joint tenancies between married couples, it doesn’t matter who furnished the consideration, just ½ value is included in the deceased spouse's estate.

Answer 256

Need to look at State law. Not a gift until actually withdrawn. The creation of the account itself doesn’t have gift tax consequences.

Answer 257

If Brenda withdraws the money, there are no gift tax consequences, as it is her money. If Marco withdraws the money, Brenda has made a gift, and the gift qualifies for the annual exclusion.

Answer 258

The full value ($35K) would be included in her estate.

Answer 259

This would be considered a business context (as in Fratini), so the services will be valued as contribution. The value of those services would need to be valued against the value of the joint tenancy (then do computation of consideration--100% includible except that which is provided by the joint tenant). Upon death, take into account the monetary amount and the value of services provided (which need to be rendered in a business context and more than minimal).

Answer 260

Eliza’s services are valued since they took place in a business context, so the consideration that Marco provided is offset based on Eliza's services.

Answer 261

Trace the consideration. Lee is considered to have furnished the entire initial consideration ($50K), and Brittney furnished the $500 by earning it. Thus, only $500 is excluded from Lee's estate.

Answer 262

Presumption is that 100% is includable. The tricky part of this is that the consideration for Nikki has to be subject to income tax (needs to be included in income tax base for it to have credit in this context). Nikki gets no credit for the 25K which is her part of the appreciation. Just changed form, and that carried over for the estate tax. So, the full 180K is includable in Quinton’s gross estate.

Answer 263

Presumption is 100% in his estate. Need to determine consideration furnished by Nikki. There was a sale of $150K, and of that, Nikki's part of the appreciation is $25K (so this is what has entered her tax base). To calculate the consideration that she provided, the numerator is $25K and denominator is $150K. This consideration fraction is multiplied by $180K, resulting in Quinton being able to exclude $30K of the stock from his estate. So, the amount includible in Quinton's estate is $150K (see 20.2041-1(c)(5) for an example of this).

Answer 264

Douglas has made a completed gift of the remainder interest to Molly, as he has parted with dominion and control of the interest. Because it’s a future interest (Molly doesn’t have immediate use, possession, or control of the property), it does not qualify for the annual exclusion.

Answer 265

The value of the remainder interest would be based on the value of the property, minus Douglas’ life estate (considering Douglas’ life expectancy and the interest rates defined in the actuarial tables on the 7520 rate).

Answer 266

The full value will be included. He’s retained the right to income for his lifetime, so it’s all included in his estate upon death (the FMV is included).

Answer 267

When parties are related, then the income interest value is deemed to be zero when doing the calculation (unless it’s a qualified income interest (2702)).

Answer 268

No inclusion. The distributions for support here are discretionary (if mandatory, this would be considered a support trust). Because the distributions are discretionary, there are further steps: (1) is the settlor acting as trustee? If yes, inclusion. (2) If not acting as trustee, and CANNOT act as trustee, then there’s no inclusion (if they CAN act as trustee, then there’s inclusion).

Answer 269

No. There is no legal obligation to support.

Answer 270

No, under 2036(a)(1), there would not be inclusion. There’s not an obligation to make distributions for his support.

Answer 271

There’s no support standard here (i.e. “support”), so there is no inclusion under 2036(a)(1). However, Manon is acting as trustee. She can give it to her husband, or, it can go back to the principal, in which case it goes to the remainderman (not her husband). So, there’s inclusion under 2036(a)(2), as she’s deciding where is goes.

Answer 272

The income had to be distributed, but she could use principal for support. She had discretion to use the principal for care, support, maintenance, and health. Because this is a discretionary distribution of principal that can be used to discharge her obligations of support, the principal is included in her gross estate under 2036(a)(1).

Answer 273

No inclusion in Jude’s gross estate. 2036. Rev. Ruling 2004-64.

Answer 274

The trustee MUST make distributions, so everything is included in the gross estate.

Answer 275

The trustee has discretion to make distributions (and there is no agreement, express or implied), so there’s no inclusion.

Answer 276

The trustee has discretion to make distributions (and there is no agreement, express or implied), so there’s no inclusion.

Answer 277

This is a classic 2036(a)(1). He transferred the property and continued to live in it. The retained interest is implicit, and it causes the FMV of the house to be brought back into his estate upon his passing.

Answer 278

If $2K is a fair rental value, and if the parties reported this as a rental arrangement (income taxes, deductions, etc.), then this will not be included in Vicente’s gross estate.

Answer 279

Raphael didn’t rent out the house or anything, so it appears that Vicente still has an interest in the house. Probably inclusion in Vicente’s gross estate.

Answer 280

So long as Raphael’s keeping the rent and reporting it as income, then this would not lead to there being a retained interest (and thus there would not be inclusion). If it’s going back to Vicente, that’s problematic.

Answer 281

This isn’t actually rent, even though they’re calling it that. The retained interest would cause inclusion in Vicente’s estate.

Answer 282

The house will be included in Vicente’s estate. This looks like a structured transaction to get around the rules. The initial transaction was an installment sale, but what’s coming back to Vicente doesn't have value, so it was a gift at the outset due to the structured forgiveness (especially when considering the debt-forgiveness in the Will).

Answer 283

Getting an amount every year is an annuity. If it were just the case that an annuity were being exchanged for the house, then there would be no inclusion in gross estate. However, in this case, Vicente continues to live in the house, so there’s still inclusion (retained interest under 2036(a)(1)).

Answer 284

Because Vicente has moved out, this should just be the exchange of an annuity for the house. Thus, the house's value shouldn't be included in his estate.

Answer 285

It's possible that there is no inclusion because Raphael is renting out the house and Vicente isn't living there. However, because the payments line up so closely ($24K a year vs $25K a year), there is cause for concern.

Answer 286

100% of the interest would be presumed to be in Vicente’s estate under joint tenancy, but if they hold it has tenants in common, only the portion that he owns (60%) would be included in his estate. Since Raphael is paying his proportionate share, this is a good transaction. A benefit here is that a 60% interest warrants a discount (because it’s a divided interest in property).

Answer 287

This is a good transaction, so 60% (the portion that Vicente owns) would be included in his gross estate.

Answer 288

This is a QPRT. If he fails to outlive the term, it all comes back into his estate.

Answer 289

No inclusion because he outlived the term and then moved out of the house (good!).

Answer 290

Would need to determine if $2K is the FMV for renting the property. If it is, then there is no inclusion.

Answer 291

2036(a)(1) doesn’t apply (no retained right to income or remainder). EXCEPTIONS: (1) If there’s an express or implied agreement, then there’s inclusion. (2) Under state law, can creditor’s reach the trust? If so, inclusion. (in most cases, including in AZ, you can’t avoid your creditors by creating an irrevocable trust with a third-party trustee). (3) If the decedent is acting as trustee, then there’s inclusion. (4) If the trustee has discretion to distribute according to an ascertainable standard, then there’s inclusion (because the decedent/beneficiary can compel a distribution). This would be included in her estate.

Answer 292

It looks like there’s an implied agreement, so there’s inclusion. EXCEPTIONS to 2036(a)(1) which create inclusion: (1) If there’s an express or implied agreement, then there’s inclusion. (2) Under state law, can creditor’s reach the trust? If so, inclusion. (in most cases, including in AZ, you can’t avoid your creditors by creating an irrevocable trust with a third-party trustee). (3) If the decedent is acting as trustee, then there’s inclusion. (4) If the trustee has discretion to distribute according to an ascertainable standard, then there’s inclusion (because the decedent/beneficiary can compel a distribution).

Answer 293

This should be included under 2036(a)(1). There is (1) and interest for (2) a prescribed period (his life).

Answer 294

Included in her estate under 2036(a)(1) because she can control the distribution of income (prescribed interest) during her life (prescribed term).

Answer 295

Yes, she has a prescribed interest (right to income for life), and a prescribed period (termination determined by reference to her death). Both together create inclusion in estate.

Answer 296

There's a prescribed interest (right to the income) for a prescribed period (didn't discontinue before the decedent's death). The trust is included in his estate.

Answer 297

There's a gift (because Heinz has transferred property and not received anything back), but this is not a completed gift because he reserved the right to revoke the trust. The trust is included in his gross estate because he can take it all back. Included under 2036 and 2038.

Answer 298

The gift is not completed, as he is able to change the disposition for himself or for other beneficiaries. The trust is included in Tito's gross estate under 2036(a)(2) and under 2038 (power at the moment of death).

Answer 299

He can change the income interest by terminating the trust, so that’s not complete, but the remainder interest gift is complete. The trust is included in Marcel's estate under 2038, because he has the power to terminate the trust at the time of death. 2036 causes inclusion as well because he has a prescribed interest to, alone or with conjunction of others, determine the possession or enjoyment of the property.

Answer 300

The creation of the trust is a completed gift. The fact that he can substitute does not render the gift incomplete. The trust is not included in Seamus' estate because substitution is not one of the powers that causes inclusion.

Answer 301

This is a completed gift. There is no inclusion in his gross estate because none of these powers are distributive—they are administrative.

Answer 302

This is included in Amir's estate under 2036(a)(2). He has the power to designate the persons who shall possess or enjoy the property or the income therefrom.

Answer 303

The wife doesn’t have a substantial adverse interest, so this isn’t a completed gift (if she had a substantial adverse interest, then it would be complete). This is included in Levi's estate.

Answer 304

This is a completed gift because Agnar has a substantial adverse interest. The trust would be included because he has the power (alone or in conjunction with others) to revoke (see 2036(a)(2) and 2038).

Answer 305

This is ascertainable (look to the regs to determine if ascertainable—2041 & 2514’s regs. 2511 has some discussion too)

Answer 306

This is ascertainable. "Welfare" by itself would be a problem, but combining it with these others makes it very likely okay.

Answer 307

This is ascertainable.

Answer 308

This is not ascertainable. The income interest would be complete, but the remainder interest would be incomplete. The trust corpus would be included in Johan’s gross estate under 2036(a)(2) and 2038.

Answer 309

This is not ascertainable. The income interest is complete, but the remainder is incomplete. There would be inclusion in Johan's gross estate.

Answer 310

This is not ascertainable (see Leopold). The income interest is complete, but the remainder is incomplete. There would be inclusion in Johan's gross estate.

Answer 311

Because she can’t appoint herself, the trust would not be included in her estate. As it stands, there’s nothing here that would cause inclusion. It’s like an administration power.

Answer 312

The trust is not included because, although she can remove a trustee and appoint someone else, she can’t appoint herself. NOTE: you can’t appoint a related or subordinate party according to Rev. Ruling 95-58.

Answer 313

The trust is not included because, although she can remove a trustee and appoint someone else, she can’t appoint herself. NOTE: you can’t appoint a related or subordinate party according to Rev. Ruling 95-58.

Answer 314

This would cause inclusion under 2036(a)(2), and, if she was acting as trustee at her death, there would also be inclusion under 2038. Definitely under 2036(a)(2) though.

Answer 315

Analyze under 2036 and 2038. 2036: a right exists during lifetime (prescribed power for prescribed period) = 2036(a)(2) inclusion. 2038: at the time of his death, he doesn’t have the power anymore, so no inclusion under this one. Overall, though, there is inclusion!

Answer 316

The trust would be included under 2036(a)(2). Also includible under 2038 because the enjoyment of the beneficiaries' property was subject to power she could exercise in conjunction with the other trustees.

Answer 317

This would cause inclusion under 2038. At the moment of death, she had a power which causes inclusion. Under 2036, she made a transfer, but didn’t retain the right to appoint herself as trustee—the interest came about after the fact, so 2036 isn’t causing inclusion—just 2038 is causing it.

Answer 318

The reciprocal trust doctrine would apply here. When analyzing under the reciprocal trust doctrine, we consider the following: are the trusts interrelated (are the terms of the trust similar/dissimilar?)? On what dates were the trusts created (are they close?)? What are the dispositive provisions of the trusts (have the parties been left in same economic position?)?

Answer 319

Although the amounts transferred into the trust are different, this is definitely not enough to save this situation from the reciprocal trust doctrine. While the amounts transferred matter, the dispositive provisions of the trust are really important. When analyzing under the reciprocal trust doctrine, we consider the following: are the trusts interrelated (are the terms of the trust similar/dissimilar?)? On what dates were the trusts created (are they close?)? What are the dispositive provisions of the trusts (have the parties been left in same economic position?)?

Answer 320

While it is good that the trusts were created on dates that are relatively far apart, the amounts are still the same and the dispositive provisions mirror each other. This is not enough to separate them, so the reciprocal trust doctrine applies. When analyzing under the reciprocal trust doctrine, we consider the following: are the trusts interrelated (are the terms of the trust similar/dissimilar?)? On what dates were the trusts created (are they close?)? What are the dispositive provisions of the trusts (have the parties been left in same economic position?)?

Answer 321

The trust would not be included in Gunnar’s estate. However, it will be included in Simone’s estate. This is a GPOA because she can appoint the property to herself at any time. It doesn't matter that she never exercised the power (it doesn’t matter for instruments created after 1942).

Answer 322

In this case, we would need to look at state law to determine whether this language would allow her to appoint it to her, her estate, or the creditors of either. If it does, then it will be included in her estate.

Answer 323

This is a LPOA because it doesn’t include her, her estate, or the creditors of either. So, the trust would not be included in her estate.

Answer 324

Under 20.2041-1(c)(1), just because permissible appointee is a creditor, it doesn’t turn it into a GPOA. Not included in Simone's gross estate.

Answer 325

The trust would be included in her estate. This is a gift in default (the property goes to her if she doesn’t exercise the power.

Answer 326

This will not be included in Alexis' estate. She’s acting as trustee with administrative powers—this is not a GPOA.

Answer 327

Alexis is Henry’s child, so she can distribute the property to herself, which is bad. She’s acting as a fiduciary, which mitigates against her having a GPOA, but it's still problematic. Ultimately, this is probably enough to create a GPOA.

Answer 328

Upon Alexis’ death, she can only appoint to Henry’s descendants, which her estate is not (because it’s a testamentary power, she can’t appoint to her estate). This is not a GPOA.

Answer 329

Celia has made a completed gift. She sufficiently departed with dominion and control and couldn’t change the disposition of the property. Also, this is a gift of a present interest. While Ruben doesn’t have immediate access to the property because it’s in trust, and it doesn’t sound like a Crummey trust (there's no right to take out contributions for a period of time mentioned), it may be a 2503(c) trust, which would qualify as a present interest gift.

Answer 330

The trust will be included in his gross estate, as this is a GPOA. Even if he can’t execute a will under state law, it doesn’t preclude him from being considered as having a GPOA!

Answer 331

Cedrick can use the funds for the benefit of his son, who’s a child, so he can use the funds for the discharge of a support obligation. Because of this, this 2503(c) trust is included in his estate under 2041.

Answer 332

The trust is included in Penelope's gross estate with respect to the creditor’s claims. This is because it is a backdoor GPOA, as she can still access the funds by accruing bills and having them paid with trust funds.

Answer 333

The property is included in Rowan's gross estate. He can give the property to himself and there’s no limiting standard, so this is a GPOA, causing its inclusion in his estate.

Answer 334

This is not included in Himari's gross estate. Support and maintenance are an ascertainable standard. NOTE: it's her power to ask that makes this problematic in the first place. If it's just up to the bank to distribute according to a non-ascertainable standard, this wouldn't create a GPOA (and inclusion).

Answer 335

The trust is included in Himari's estate. This is not an ascertainable standard, and Himari is the one with the power to ask for the funds, so she has a GPOA.

Answer 336

This is not included in Himari's gross estate. "Emergency" is considered an ascertainable standard. NOTE: it's her power to ask that makes this problematic in the first place. If it's just up to the bank to distribute according to a non-ascertainable standard, this wouldn't create a GPOA (and inclusion).

Answer 337

The trust is included in Brandon's gross estate. Comfort alone is not an ascertainable standard, so he has a GPOA, which causes inclusion. NOTE: we consider whether there is a GPOA under state law.

Answer 338

The trust is included in Brandon's gross estate. Happiness and comfort are not an ascertainable standard, so he has a GPOA, which causes inclusion. NOTE: we consider whether there is a GPOA under state law.

Answer 339

The trust is very likely included in Brandon's gross estate. We consider state law here, and care and comfort are almost certainly not ascertainable, so he very likely has a GPOA, which causes inclusion.

Answer 340

The trust is not included in Brandon's gross estate. Regulation 20.2041-1(c)(2) says that this is ascertainable.

Answer 341

Not included in his estate. Ascertainable standard.

Answer 342

IRS in Rev Ruling 77-60 says that this ISN’T ascertainable.

Answer 343

When there is an ascertainable standard, it’s theoretically controlled by the settlor, or at least something external to the beneficiary, so because the beneficiary doesn’t have full discretion, it shouldn’t be treated as property owned in fee simple. Ultimately, the courts will enforce because they know what the terms mean when they're ascertainable.

Answer 344

The trust is not included in Hiromi’s gross estate because she could only exercise the power in conjunction with Rima, who had a substantial adverse interest in the property subject to the power (daughter is remainderman, which creates the substantial adverse interest).

Answer 345

This is not included in her gross estate. It doesn’t matter whether she exercises the power to invade the principal or not, what matter is that there's a person with a substantial adverse interest that she needs consent from.

Answer 346

The trust is not included in Estella's gross estate. ANALYSIS: (1) Joint Power / Substantial Adverse Interest? There's no joint power, so there's no one with a substantial adverse interest. (2) Conditional Power (not illusory / significant nontax consequences?)? There is no GPOA if the rights are dependent on a condition happening and that condition does not happen on or before date of death. No GPOA --> No inclusion.

Answer 347

The trust would be included in Sakura's estate. ANALYSIS: (1) Joint Power / Substantial Adverse Interest? There's no joint power, so there's no one with a substantial adverse interest. (2) Conditional Power (not illusory / significant nontax consequences?)? No. The depletion of one trust before accessing another is not considered to be a significant non-tax condition.

Answer 348

The trust is included in Wilber's gross estate. Because Wilber can make himself the trustee, it is a GPOA and included in his estate. His power to make himself the trustee imputes the powers to him. See 20.2041-1(b)(1).

Answer 349

The trust is not included in Wilber's estate. This is not a GPOA because the powers aren’t imputed to Wilber (because he can’t act as trustee himself).

Answer 350

Yes, because he has a GPOA.

Answer 351

The entire trust is included in Nick's estate (he has a GPOA). Nick hasn't made a gift, because you can't make a gift to yourself.

Answer 352

Nick has made a transfer of $50K. It would be a gift because Nick hasn’t kept it for himself (he has sent it to someone else). This is not a taxable gift because it qualifies for the tuition exclusion under 2503(e).

Answer 353

The trust's value is included in Rowan's gross estate. This is like the Jenkins case. The timeframe doesn’t matter. He had a GPOA and could have exercised it, so it’s included. To avoid this result, he can disclaim. He has 9 months to disclaim, and though he died, his PR can step in and disclaim for him. NOTE: One of the requirements of disclaiming is that they can’t take possession and then disclaim later.

Answer 354

This would not give Rowan a GPOA because under this scenario, he can’t appoint to any of the four that create a GPOA.

Answer 355

Here, the assets will be included in Rowan's estate. Generally, when exercised, you can’t give the recipient their own POA. This is the Delaware tax trap (2041(a)(3)). The tax consequences of giving someone else a POA is that it changes your limited POA to a General POA. For estate tax purposes, Rowan changed his LPOA into a GPOA.

Answer 356

Jason is entitled to the gift tax annual exclusion because this is a gift of a present interest (Eleanor has a Crummey withdrawal power).

Answer 357

Eleanor has made a taxable gift of $12K (and this taxable gift does not qualify for the annual exclusion). Eleanor had right to exercise her withdrawal right but didn't do so. This is a lapse. We’re only concerned with lapses that exceed $5K or 5% of the property. The greater of either one of these ($5K here) is deemed to have been a gift, so $12K would be the gift here. It's not a gift of a present interest, so it doesn’t qualify for the annual exclusion.

Answer 358

Jason has made a taxable gift of $33K. $50K went in, and Eleanor has the right to withdraw, meaning that there is a present interest, so $17K would be excluded. This leaves $33K as a taxable gift. While it doesn't matter to Jason whether Eleanor makes the withdrawal, it matters to Eleanor. The lapse would be more than the greater of either 5K or 5%, so there's a lapse of $45K, and she’s deemed to have made her own gift in this amount (and would be a taxable gift by her).

Answer 359

Under this scenario, $12K is deemed to have lapsed in year one. She is deemed to have made each yearly transfer (of the amount she doesn't take) into the trust, which increases her ownership percentage with the amounts that she is considered to have added to the trust. After a relatively short period of time, she is considered the owner of the trust, which can be especially problematic if it's invested in some kind of long-term life insurance policy.

Answer 360

All included under 2042(1) because it’s paid to the estate (as his executor).

Answer 361

It would all be included in his estate because it reverts back to the estate. NOTE: Essentially all contracts will hold that it goes to the estate if there’s no named bene upon death.

Answer 362

The value of the policy’s cost is included in Terry’s gross estate because Gina is treated as predeceasing Terry, so it reverts back to his estate.

Answer 363

Yes, a portion will be included in Fergus' gross estate. The amount actually spent will be included under 20.2042-1(b), which says that when there’s an obligation to return funds to the estate, the amount actually transferred is included.

Answer 364

This will be included if it’s actually done/transferred. So $450K in this case would be included.

Answer 365

Because it’s an obligation of Bruce, it’s treated as an indirect payment of the estate, so the $175K is included.

Answer 366

This is satisfying one of Bruce’s obligations, so it’s includible under 2042(1) and 2042(2) (because he owns the policy).

Answer 367

Assuming that he’s still the owner and can change the beneficiaries, there’s inclusion. If included, the entire death benefit of $1M would be included.

Answer 368

No inclusion. ANALYSIS: (1) There is no inclusion under 2042(1). (2) 2042(2) doesn’t create inclusion because he doesn’t own the policy and doesn’t have an incident of ownership (we’re not told that he has any, and the Will devise is NOT a reversionary interest) (3) 3-year lookback? We’re not told when this was, but we’ll assume that it's beyond the 3 years.

Answer 369

There would be inclusion in Asher's gross estate. The right to borrow against the policy is an incident of ownership.

Answer 370

This will cause inclusion. The ability to veto is an incident of ownership.

Answer 371

This would create inclusion because at the date of death he once again owned the policy.

Answer 372

Yes, the policy is included in his estate. At the moment of his death, he had an incident of ownership. It doesn’t matter how they got to him.

Answer 373

This would be included in Adela's estate. She’s considered as owning to policy since she's acting as trustee and was the one who transferred the policy.

Answer 374

This would be included in Adela's estate. She’s considered as owning to policy since she's acting as trustee and was the one who transferred the policy.

Answer 375

No, no inclusion because she hasn’t transferred the policy or paid the premiums.

Answer 376

There would be inclusion of the policy in Adela's estate. She’s paying the premiums while acting as trustee.

Answer 377

As trustee, she can borrow against the policy because she’s also an income beneficiary, so this would cause inclusion in her estate. NOTE: If it wasn’t on her life, it wouldn’t cause inclusion.

Answer 378

This would not be included in Hamish's gross estate. He’s given up all rights (so no ownership or incidents of ownership). If it was within 3 years of death, then there would be inclusion, but we’re not told this.

Answer 379

This would cause inclusion. The right to cancel is an incident of ownership.

Answer 380

Depending on the circuit you're in, this may be an incident of ownership.

Answer 381

This would not cause inclusion. The power to terminate employment (and by extension, the policy) is not considered an incident of ownership under a group term life insurance policy.

Answer 382

This would not cause inclusion. The right to convert the policy in this way is not considered an incident of ownership.

Answer 383

There would not be inclusion here because the policy is going into the corporation, which will increase the stock value (which will then cause proportionate inclusion in the estate through those means).

Answer 384

The proceeds will be included in Luise's estate. When the decedent is a sole or controlling shareholder and death benefit is payable to a third party, the death benefit will generally be included in the decedent's gross estate (unless it's a valid business decision). Luise is considered a controlling shareholder in this case because of veto power.

Answer 385

The insurance policy increases the stock value of the corporation.

Answer 386

This does not cause inclusion in Luise's estate. The general rule applies that when the death benefit is to the corporation, there is no inclusion in the estate. The fact that they’re redeeming her stock is immaterial.

Answer 387

This would cause inclusion under the Estate of Levy rule. The value included would be the amount in excess of what is owed to the company.

Answer 388

This qualifies as a present interest, so it qualifies for the annual exclusion. The value would be the cash surrender value (interpolated terminal reserve).

Answer 389

The policy is included in her estate. The value would be the cash surrender value (interpolated terminal reserve) (2033).

Answer 390

This would be included in Felipe's estate because of the 3-year lookback. The entire death benefit comes back into the estate under 2035 in this case.

Answer 391

This is not included in his estate (he has passed the 3-year lookback term).

Answer 392

This is a taxable gift. It's a transfer into a trust, and the general rule is that this isn’t a present interest UNLESS there’s a Crummey power (so likely no exclusion under 2503(b)).

Answer 393

Yes, because there’s a 3-year lookback.

Answer 394

Because Max didn’t create any reversion, there’s no inclusion.

Answer 395

The policy will be included because she created the trust and retained an interest (the income interest), and this causes inclusion under 2036(a) (transfer with a retained interest).

Answer 396

With respect to claims, you always take into account post-death events! You’re not allowed a deduction for anything unless it’s paid. Here, $150K would be deductible, NOT the $1.5M.

Answer 397

A wrongful death claim is generally not included in the estate (unless it included pain and suffering of the decedent before they died—that amount would be included).

Answer 398

Our test for valuation is the price at which the property would change hands between a willing buyer and a willing seller, neither being under compulsion and both having reasonable knowledge of the relevant facts. If there were indicia of fuel tanks (EX: fuel tanks were built and maintained there and the buyer knew that), then it’s reasonable that a reasonable buyer would inquire into whether there were fuel tanks and would discount for the possibility of fuel tanks. The property was sold for $425K within the time period that would allow us to consider that as the indication of FMV for valuation.

Answer 399

Yes, must be included, and this claim is an asset of the estate, so the valuation is based on the amount that Susanna is claiming multiplied by the probability of success. NOTE: YOU’D HAVE A THIRD-PARTY OPINE AS TO THE VALUE OF THE CLAIM, AND THEY’D PERFORM THIS KIND OF ANALYSIS.

Answer 400

Kristin didn’t file on time, so this wasn’t a claim that was allowable under state law (not valid). As this wasn’t a legally enforceable claim, it is not deductible. NOTE: It's problematic for the PR to pay something that is not a valid claim.

Answer 401

This would be deductible. This is a valid claim (should be valid)—it’s a promise to make a Will (NOTE: which needs to be in writing). Wilbur received benefit of claim, so valid claim. If it's in writing, it’s a valid claim and should be deductible (the amount that was actually paid).

Answer 402

20.2053-1 has 5 factors to apply when the parties are related. In this case, the most important one is the 5th factor: any amounts paid are recorded by both parties for income and employment purposes. Johnny needs to be reporting these amounts if Wilbur's estate wants to have a chance of it being deductible.

Answer 403

This is estate of Shapiro. The court allowed a deduction and found that the services that were provided were sufficient to support a contractable division of property—however, there is a strong dissent. SO, should probably be deductible, but it would have a stronger claim if they did not have an intimate relationship.

Answer 404

Should deduct on the estate tax return because there are limits on casualty loss for income tax purposes.

Answer 405

No. From a public policy standpoint, the forfeited property isn’t deductible.

Answer 406

He can, but why would he bother?

Answer 407

Yes, if they can prove that it was not donative in nature but rather was bona fide consideration.

Answer 408

Probably not, because he could avoid income tax—better off just receiving it as a gift.

Answer 409

A donor needs to directly give the property to the organization. Even though Kendrick likely knew that it would end up with a charity, it does not qualify for the charitable deduction.

Answer 410

Looks like there’s a charitable purpose—now it depends on the makeup of the county (if the size of the pool is small and just made up of people that you’re related to, then this is no good).

Answer 411

The donation has to be to a qualifying organization. You can leave it in a charitable trust, but because lineal descendants are included here, this will not qualify as a charitable trust.

Answer 412

If this is a very common last name, it’s probably okay, but if it’s not common, this probably wouldn’t be okay.

Answer 413

This would be a deduction for an outstanding claim. It doesn’t have to be adequate and full consideration in money or money’s worth if you’re giving to a charity. Deductible of an outstanding claim allowed here.

Answer 414

For federal purposes, if there is an outstanding charitable pledge and it’s actually satisfied, the claim for a deduction is allowed even if it’s not legally enforceable under state law.

Answer 415

This is not deductible because it’s more like an independent act from Timothy (not a transfer from the decedent to the law school). There’s no estate tax deduction, but Timothy can get an income tax deduction by doing this.

Answer 416

No deduction, because it’s not certain that the property will be designated to go to charity.

Answer 417

Yes, this would be deductible because it’s as if he directed it to go to charity by failing to use his GPOA.

Answer 418

Yes, this is deductible because he is making sure that it goes to a qualified charity—decedent doesn’t have to select the charity as long as they make sure it goes to a charity.

Answer 419

Dylan’s estate will not be entitled to a charitable deduction (when he dies, the property is going into a trust—it doesn’t qualify as a split-interest trust), and neither will Nikola (this trust isn’t included in his estate—it’s just a life estate. He’s exercising a LPOA when he selects the charity!).

Answer 420

Yes, this should be deductible so long as it’s for a public purpose and so long as there are no impermissible restrictions.

Answer 421

This is not a transfer in trust. He’s given half of the property to charity, and this half would be deductible ($750,000).

Answer 422

Yes. In the code, there’s an exception for personal residences and farms. Giving a life estate in either of these and a remainder to charity results in a split-interest exception such that the remainder qualifies for charity. To value, take the individual’s interest with their life expectancy and the 7520 rate (presumed interest rate). The balance would be what’s given to charity.

Answer 423

This is not in a form that qualifies. It needs to be an annuity or unitrust. No deduction.

Answer 424

No. This isn’t a unitrust or an annuity, so it doesn’t qualify.

Answer 425

No. This is an annuity (a CRAT), so that part’s okay, but it’s only 3% of the trust, so it does not qualify.

Answer 426

Yes. This is a CRUT, and the percentage is in the right range, and it's within the right number of years, so it qualifies.

Answer 427

No. This isn’t an annuity or unitrust and it’s not in a form that qualifies.

Answer 428

No. This is an annuity, but it’s only 3.5% of a million dollars.

Answer 429

Yes. It’s an annuity, it’s at least 5%, it’s within the 20 years—this should be fine.

Answer 430

ESTATE VALUE: Half of the home, so 300K (2040(b) makes it automatically 50/50 in the case of married spouses) + the 1.7M life insurance policy + 3M investments + the trust, worth 5M, so the total assets are 10M. MARITAL DEDUCTION: The marital deduction applies. All of the 2056 requirements are met (included in gross estate, goes to surviving spouse, etc.).

Answer 431

The marital deduction applies to all three. All of the 2056 requirements are met (included in gross estate, goes to surviving spouse, etc.).

Answer 432

All can be deducted (marital deduction), so $0.

Answer 433

The gross estate is worth $13.5M, and after the marital deduction, the taxable estate is $8.5M

Answer 434

The gross estate is worth $13.5M, and after the marital deduction, the taxable estate is $6M.

Answer 435

Taxable estate is $8.5M. The issue is whether the lengthy discussion/negotiation creates a marital deduction (can you rearrange things even though the documents don’t provide for the deduction?). The answer is no. There needs to be a bona fide Will contest. Here, we just have the parties discussing things.

Answer 436

If her elective share is outright, then it qualifies. If it’s a life estate, then it doesn’t qualify.

Answer 437

TRIAL: This qualifies for the marital deduction because this is a bona fide Will contest. SETTLEMENT: This will still qualify for the marital deduction because it is a bona fide Will contest.

Answer 438

GROSS ESTATE: $7.5M. TAXABLE ESTATE: $7.5 (no marital deduction because for purposes of the marital deduction, state law doesn’t override what actually happened in terms of when the people died).

Answer 439

GROSS ESTATE: $2M (she’s considered to have died first for our purposes). TAXABLE ESTATE: $2M.

Answer 440

Determine the value of Kagami’s interest (with the 7520 rate) and subtract this from the property value to get the remainder interest value, and this is what is deductible.

Answer 441

The marital deduction does not apply. None of this is included in Georgi’s estate when he dies (he just has the income interest, and then it's going to the kids).

Answer 442

This will not qualify for the marital deduction (unless there's litigation over this, this won't work).

Answer 443

This is a non-deductible terminable interest (terminates upon remarriage), so it doesn’t qualify for the marital deduction.

Answer 444

The remainder interest would qualify for the marital deduction. It would be valued by the worth of the property minus the life estate (which doesn’t qualify for the marital deduction).

Answer 445

The rents, the stocks and bonds, half the value of the house, a third of the interest in the Maine property, the condo, the patent (it's a terminable interest, but it's not going to anyone else, so it’s okay), and the insurance proceeds. It's all deductible.

Answer 446

Need to look under state law to see what the rights of a joint tenant are under state law. If she has the right to sever the interest and get half of it (just need the ability to do so), then that half should be eligible for the marital deduction.

Answer 447

The marital deduction will not be allowed for these amounts. This is because the monthly amount can terminate upon remarriage or death, it’s a nondeductible terminable interest and doesn’t qualify for the marital deduction (this is like the Jackson case).

Answer 448

GROSS ESTATE: .375M + 1.25M (full value of annuity included) + 10M = $11.625M TAXABLE ESTATE: $0. All qualified for the marital deduction. MARITAL DEDUCTION FOR HOUSE: Yes, the house qualifies for the marital deduction.

Answer 449

ANNUITY: The annuity qualifies for the marital deduction. The payments stop upon death, so this qualifies. TRUST: The trust qualifies for the marital deduction. Leroy has a GPOA, and this is going into his estate.

Answer 450

This will not qualify for the marital deduction. It is a non-deductible terminable interest.

Answer 451

You can’t have the executor purchase and still have the property qualify for the marital deduction. If she had purchased it herself during her life, then it would have qualified.

Answer 452

This qualifies—it was a period less than six months, and he did in fact survive.

Answer 453

This would not be deductible. He didn’t satisfy the condition that he survive the 90 days.

Answer 454

No, this goes beyond the 6-month rule, so it is not deductible (doesn’t qualify, even though he survived).

Answer 455

This is life insurance, which has very favorable provisions in the code. 2056(b)(6). It qualifies for the marital deduction. They have to receive the income and be able to appoint it to qualify.

Answer 456

To qualify, income has to be payable at least annually and there has to be a GPOA. This qualifies, so the marital deduction applies.

Answer 457

We need to look under state law to see if the income needs to be paid annually—normally, it will require this so that this qualifies.

Answer 458

No. The distribution of the income cannot be discretionary.

Answer 459

Yes. This will qualify so long as Aleksandar has the right to receive the income.

Answer 460

This will not qualify. The income NEEDS to be distributed (or he needs the right to withdraw) annually.

Answer 461

No. This isn't entitling Aleksandar to all of the income, so it does not qualify.

Answer 462

No, this doesn’t qualify. Need to look at what the settlor intended to do (the fact that this was captioned Marital Deduction Trust would be helpful though). NOTE: The court was willing to shoehorn the right interpretation in in one of the cases that we read (because it was titled “Marital Deduction Trust”).

Answer 463

You can have a marital deduction that’s less than the whole—here, one half of the trust would qualify for the marital deduction (need a POA over that half too).

Answer 464

This won’t qualify—it has to be a percentage of it, so not even a portion of the trust will qualify in this case.

Answer 465

Doesn’t qualify under (b)(5) (income is okay, but there’s no POA to himself or his estate), but it will under (b)(7).

Answer 466

Doesn’t qualify under (b)(5) (GPOA required—to herself or her estate. This is a LPOA), but it will under (b)(7).

Answer 467

Doesn’t qualify under (b)(5) (LPOA) or under (b)(7) (has power to appoint to someone other than herself).

Answer 468

This qualifies under both (b)(5) and (b)(7).

Answer 469

This qualifies under (b)(5), but probably not (b)(7) (she may be able to use the trust for someone other than herself).

Answer 470

Doesn’t qualify under (b)(5) (no GPOA), but it does under (b)(7).

Answer 471

This doesn’t qualify under (b)(5) (no GPOA), but it does under (b)(7).

Answer 472

This doesn’t qualify under (b)(5) (no GPOA), but it does under (b)(7).

Answer 473

Yes. Even though the executor has discretion to make the election, it’s okay.

Answer 474

This is not a problem—stub income doesn’t need to go to the surviving spouse, it can go to the next beneficiary. NOTE: stub income still included in the gross estate.

Answer 475

No. The duty of consistency would require that they stick to the original election and treat the 8M as part of Freja’s gross estate.

Estate & Gift Tax Questions Flashcards

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