Federal Estate & Gift Tax- Miranda Perry- Piede

Federal Estate & Gift Tax- Miranda Perry- Piede - 2033...

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§2033 Requirements: - Property owned by decedent and o Includes debts payable to decedent (even if cancelled) o Includes claims (even if speculative) Not wrongful death claims But includes claims for suffering while living o Right to future income must be discounted (time value of money) If property is owned and produces income, the future income is not taxed Though it is usually included in the value of the property o Business interests Liquidation payments count Future profits don’t - Property transferred by decedent o Does not include life estate on D’s life (interest vanishes at death) Can include life estate on life of another o Does not include joint tenancies (interest vanishes at death) Does include tenancy in common § 2035 Gifts Made Within Three Years of Death - Presumed it was a deathbed transfer to avoid estate tax - Effect of 2035 negligible b/c of the unificatin of estate and gift tax rates (can’t avoid tax) Significance today - Gift taxes paid or payable on a gift made 3 years prior to death includable o Without, it would be advantageous to make deatbed gifts b/c it would reduct gross estate o Also includes gifts made by D’s spouse - Interaction with §§2036, 2037, 2038, 2041 (limited), 2042 (not 2040) o E.g. D transferred property to X and reserved a life estate. Two years prior to death, he transferred it to X. Without § 2035, nothing would be includible (b/c he didn’t have interest @ death) With § 2035, the entire value is included Even if it was given for consideration (of value of life estate), the entire value of the property, less the consideration given, is included. § 2036 – Transfers with Retained Life Interests - Includes transfers by decedent with a retained life estate - Looks at time of transfer - If applicable, it pulls in entire property - Requirements #1 D Transferred property - Doesn’t count if someone gives D the interest o Look to substance, pre-arrangement, consideration - Reciprocal trusts qualify o Are they in the same economic position if they created the trusts and named themselves as life B’s? o Intent irrelevant o Only value of smaller trust (400K and 500K, 400K is recipricol) o Initial ratio survives – if 4/5 at start, then 4/5 of the larger estate is includable, even if it grows more or less rapidly #2 Tr’or retains suspect interest - (a)(1) Right to income, possession or enjoyment o “Possession or enjoyment” Needn’t be a legal right; can be implicit ag’t If continued enjoyment (such as still living in a transferred residence), presumption of prearrangement Exception: transfer to spouse Gift and leaseback – still included in estate If it’s for FMV rent, then it’s not included, if for ½ rent, it’s ½ included, and if it’s for 150% rent, it’s not included in estate, but there will be an applicable gift tax E.g. art still on display at G’s house o “Right to income” Only the right needed –even if not receiving income
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This note was uploaded on 02/12/2008 for the course LAW 7207 taught by Professor Perry during the Fall '06 term at Colorado.

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Federal Estate & Gift Tax- Miranda Perry- Piede - 2033...

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