chapter -17 solution

chapter -17 solution - 17-1 Chapter 17 Solutions Federal...

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17-1 Chapter 17 Solutions Federal Gift & Estate Taxes (2010) updated: July 24, 2009 31. a. NT The transfer is incomplete. Example 15 b. ET A testamentary transfer occurred. Example 15 c. GT Marcus has made a gift of one-half the purchase price of the property. p. 17-22 d. NT Kendal made no contribution to the cost of the property, so nothing is included in his gross estate. p. 17-22 e. NT Merely purchasing life insurance is not a taxable event. p. 17-27 f. GT Winston has made a gift of the proceeds to Sophia. Example 57 g. NT No gift takes place when the account is established. Example 49 h. GT A gift now occurs. Example 50 i. ET Since this is a testamentary transfer, the estate tax applies. Example 51 36. Regarding the December 2008 disclaimer of a partial interest, the effect of § 2518 is to treat one- half of the land as passing from Jesse to Arnold. In other words, Lorena is not involved in the transfer. As to the June 2009 action, however, the disclaimer is not timely. Because the nine- month requirement is not met, § 2518 does not apply. Consequently, Lorena will have made a gift to Arnold of $1,100,000 (50% × $2,200,000). Examples 17 and 18 37. a. Alicia’s gift tax is computed as follows. Amount of gift $1,200,000 Less annual exclusion (13,000) Taxable gift $1,187,000 Gift tax on $1,187,000 per Appendix A, p. A-7 $345,800 + 41%($1,187,000 – $1,000,000) $ 422,470 Less maximum credit allowed for 2009 (345,800) Gift tax due on 2009 gift $ 76,670 b. If the § 2513 election is made: Alicia Mitch Amount of gift ($1,200,000 ÷ 2) $600,000 $600,000 Less annual exclusions (13,000) (13,000) Taxable gifts $587,000 $587,000 Add prior taxable gift –0– 100,000 Current and prior taxable gifts $587,000 $687,000 Alicia’s gift tax on $587,000 per Appendix A, p. A-7 $155,800 + 37%($587,000 – $500,000) $187,990 Less maximum credit allowed for 2009 (345,800) Gift tax attributed to Alicia $ –0– Mitch’s gift tax on $687,000 per Appendix A, p. A-7 $155,800 + 37%($687,000 – $500,000) $224,990 Less: Deemed paid tax on 2002 gift (23,800) Maximum credit allowed for 2009 (345,800) Gift tax attributable to Mitch $ –0– By making the § 2513 election to split, Alicia saves $76,670. Examples 24 and 25
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17-2 38. $3,578,000 is included in Kenneth’s gross estate, determined as follows. $1,500,000 (City of Boston bonds) + $70,000 (interest on bonds accrued to death) + $900,000 (Garnet stock) + $800,000 (Brown stock) + $8,000 (dividend on Brown stock) + $300,000 (note receivable from Brad) Of the $90,000 interest on the bonds, $20,000 is excluded because it was earned after Kenneth’s death. The $7,000 dividend on the Garnet stock is excluded because the date of record followed Kenneth’s death. The promissory note is included at its face amount of $300,000 as no information is given to indicate a different value. (As Brad’s business is successful, there is no reason to believe the note is uncollectible.) Examples 28 to 30 39. a. $1,900,000 ($800,000 + $600,000 + $400,000 + $100,000) is included in Ronald’s gross
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chapter -17 solution - 17-1 Chapter 17 Solutions Federal...

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