8 Gift Tax 2009 students

8 Gift Tax 2009 students - CHAPTER 8 GIFT TAX 1 Why would I...

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1 CHAPTER 8 GIFT TAX
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2 Why would I want to make a gift?
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3 Advantages of Making Gifts 1. Annual exclusion 2. Power of giving: getting gift tax out of estate 3. Freezing value of estate 4. Removing life insurance to ILIT 5. Creating discounts through fractionalizing interests 6. Avoiding probate 7. Avoiding state death taxes 8. Unlimited exclusion for medical expenses and education 9. Shifting income 10. Creating estate for spouse to utilize unified credit 11. Charitable giving 12. Enjoy benefits of giving 13. Meet percentage tests for special valuation, Sec. 6166, etc.
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4 Gift Tax Formula FMV of donor’s total gifts during the year - ½ of gifts attributed TO spouse - ½ of gifts attributed FROM spouse - Annual exclusion - Charitable deduction - Marital deduction Taxable gifts for the current year +Prior taxable gifts Cumulative taxable gifts x Current rates Tax at current rates on cumulative taxable gifts -Tax at current rates on prior taxable gifts Tax on current year’s taxable gifts -Unified credit remaining Gift tax liability for current year 1
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5 Gift Splitting ± Split gifts with spouse ± History: ² Community property states vs. separate property states ± Take advantage of annual exclusion
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6 Gift Splitting ± Split gifts with spouse ± History: Community property vs. separate property ± Take advantage of annual exclusion
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7 Gift Splitting: Separate Property State H gives 26,000 H gives 26,000
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8 Gift Tax: Gift Splitting: Community Property State 13,000 13,000 13,000 13,000
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9 Annual Exclusion in General ± $12,000 (2008), $13,000 (2009) per donee per year ± $24,000 or $26,000 if split gifts Prob. 3
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10 Elements of a Gift ± Identification of donees
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11 Annual Exclusion ± Must have a present interest ² “unrestricted right to the immediate use, possession, or enjoyment of property or the income therefrom.” ² Not a future interest ² Hackl
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12 Problem 2 Using Pub 1457 Aleph Tables Irene (income interest 20 years) $50,000 Factor x . Value $ Ralph (remainder) $50,000 Factor x . Value $
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13 Irene (income interest for life ) $50,000 Factor x . Value Ralph (remainder) $50,000 Factor x . Value Problem 2(b)
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14 WHAT IS A GIFT? ± Offer son condo at $80,000, sell to him at $60,000 ± Promise $100,000 if you marry me ± Please come to Boston ± Pay for kids' food and clothing ± Pay you $30,000 if you graduate ± Guarantee child's loan ± Give me $$$ or I'll shoot ± Give $50,000 to the Democratic party ± Prenuptial: give $2 million if give up dower interest ± Transfer to trust for child, retain power to revoke ± Pay prep school tuition $30,000 for son and friend ± Give $300,000 agree to pay donee’s gift tax ± Leave wife $1.2 million, she disclaims to son
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15 Elements of a Gift ± What is a gift?
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8 Gift Tax 2009 students - CHAPTER 8 GIFT TAX 1 Why would I...

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