Week-11_Transfer Taxes and Wealth Planning - Week 11 Transfer Taxes and Wealth Planning The Gift Tax What Makes A Gift Property transferred to a

Week-11_Transfer Taxes and Wealth Planning - Week 11...

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Week 11 Transfer Taxes and Wealth Planning
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The Gift Tax The Gift Tax
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What Makes A Gift? Property transferred to a recipient who pays no or inadequate consideration The transfer should be “ complete All gifts are valued at the FMV as of the date the transfer becomes complete Linked with the Estate Tax in a Unified System
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When Transfer is Complete? Gift does not occur until transfer is complete Transfer complete when donor has given up dominion & control Leaves donor no power to change gift’s disposition, whether for own benefit or for benefit of another Occurs when donor relinquishes control of the property and donee accepts the gift
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Valuation of Gifts Gift valued at FMV upon transfer Gift may be for a partial interest or only certain rights life estates, remainder interests FMV of partial interests determined by using actuarial tables and present value computations
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Some Special G/T Situations Creation of joint bank accounts, Creation of other joint tenancies, Forgiveness of debt, Transfer of life insurance policies, A general power of appointment. Transfers in the “ordinary course of business”
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Below-Market Loans General rules Foregone interest is taxable income to the lender and a taxable gift to the borrower De minimus rules Rules do not apply to loans ≤ $10,000
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What is Exempted? Direct PMTs of medical expenses, Direct PMTs of tuition (room & board is a gift), Property settlement in divorce Transfer to political organizations Incomplete transfers
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Exclusions & Deductions Exclude transfers up to $14,000 per donee each year (2013 and 2014) Indexed for inflation Husband and wife may each give $14,000 per donee without tax consequence (if splitting election is made) Gift must constitute present interest Future interest gifts not eligible for exclusion
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Special rule for trusts for minors Annual exclusion available for gifts to §2053(c) trusts for minors if Until beneficiary is 21, trustee may pay income and/or underlying
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  • Spring '15
  • Taxes, Taxation in the United States, Gross Estate, taxable gifts

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