Corp. Sol., 2008 Chap.13

Corp. Sol., 2008 Chap.13 - Chapter C:13 The Estate Tax...

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The Estate Tax Discussion Questions C:13-1 In general, items included in the gross estate are valued at their fair market values (FMVs) on the date of death or alternate valuation date; that is, the amount upon which a willing buyer and a willing seller would agree. Section 2032A allows a departure from the general FMV rule for farmland meeting certain requirements. Such land is valued under a formula approach at less than its FMV. Congress enacted this exception to reduce the probability that the heirs would have to sell the land to pay estate taxes. pp. C:13-2, C:13-6 through C:13-8, and C:13-29. C:13-2 For gift tax purposes, properties are valued at their FMVs as of the date of the gift. For estate tax purposes, properties are valued at their FMVs at either the date of death or, if certain requirements are met, the alternate valuation date, which generally is six months after date of death. pp. C:13-6 through C:13-8. C:13-3 For gift tax purposes, a life insurance policy is valued at its interpolated terminal reserve plus the amount of any unexpired premiums. A term insurance policy's interpolated terminal reserve value is zero because it builds up no cash surrender value. For estate tax purposes, the policy is valued at its $150,000 face value. p. C:13-6. C:13-4 Shares traded on a stock exchange are valued at the average of their high and low selling prices as of the applicable valuation date. The blockage rule allows a reduction from the average value where the decedent owned a large block of shares that would be difficult to dispose of at one time without using an underwriter and/or accepting a lower price. pp. C:13-6 and C:13-7. C:13-5 No. The executor may not use the alternate valuation date if the total value has risen. The executor cannot elect it unless it will result in (1) a lower gross estate amount and (2) a smaller amount of estate tax payable. pp. C:13-7 and C:13-8. C:13-6 An advantage of electing the alternate valuation date is that the estate tax liability is lower; a disadvantage is that the heirs receive the property at a lower basis. pp. C:13-7 and C:13-8. C:13-7 No. The land is not included in the gross estate because the only properties included in the gross estate under the transfers-within-three-years-of-death rule are those interests that would have been included under Secs. 2036 through 2038 or Sec. 2042 if the decedent had not made the transfer. Land that was gifted with no strings attached does not fall under any of these exceptions, so it is not included in the gross estate. It will be included in the estate tax base as part of the adjusted taxable gifts (and valued at date of gift value) if a taxable gift resulted from the transfer. pp. C:13-10 and C:13-11. C:13-1
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Corp. Sol., 2008 Chap.13 - Chapter C:13 The Estate Tax...

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