ACC 317 Week 9 Solutions

ACC 317 Week 9 Solutions - Chapter 27 Solutions 12 a Create...

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Chapter 27 Solutions 12. a. Create a trust with income payable to the daughter for her life. But where does the father want the trust to go when his daughter dies? Perhaps charity? Another family member? Whoever is chosen will exclude the son-in-law from inheriting the property. b. Designate ownership of the residence as a tenancy by the entirety with right of survivorship. c. Transfer the land to the children as equal tenants in common. If the land is to stay in the family, use a joint tenancy with right of survivorship. p. 27-8 and Example 8 13. It would be very unlikely that Addison will be subject to the Federal gift tax. Even if the medical expenses exceed the annual exclusion, several factors would work in her favor. First, if Walter is indigent, state law might impose upon his children the obligation of support. Paying for medical care qualifies toward meeting this obligation. Second, under the circumstances, Walter could be treated as acting as Addison’s agent. Because of Walter’s pride, the payments to the medical providers were channeled through Walter. Thus, the requirements of § 2503(e) are satisfied. p. 27-10 18. a. Section 2513 was designed to place married donors residing in common law states on a par with those in community property states. The gift- splitting approach makes available the annual exclusion and unified tax credit of the non-owner spouse. Compare Examples 21 and 22 b. Under § 2513, the nondonor spouse is treated as a donor for purposes of determining the gift tax. As the gift tax is cumulative in effect, the nondonor’s prior taxable gifts are taken into account. p. 27-14 c. The election is made by filing a gift tax return (e.g., Form 709). Example 24 d. If they were married at the time of the gift and have not married someone else during the year, the § 2513 election still can be made. p. 27-14 e. Although the election to split gifts is not necessary when gifts of community property are made, it would be available when one of the spouses makes a gift of his or her separate property. p. 27-14 20. a. No gift took place when Mike created the trust in 2004 because the transfer was incomplete. In 2009, however, the release of the power to revoke made the gift complete. Now Mike has made two gifts: a life estate to his wife and a remainder interest to the children. The life estate probably qualifies for the annual exclusion, while the remainder interest does not (it is a gift of a future interest). Unless a QTIP election is made to avoid the terminable interest limitation, the life estate does not qualify for a marital deduction—see later in this chapter. Examples 9 and 10
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b. Without knowing the fair market value of the real estate, it is impossible to ascertain whether a gift took place. If the selling price was less than value, then the difference is a gift. If they are the same, no gift occurs. If the selling price was more than value, then the son has made a gift to Jim. Examples 11 and 12
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ACC 317 Week 9 Solutions - Chapter 27 Solutions 12 a Create...

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