bmgt417 final data sheet

bmgt417 final data sheet - CHAPTER 17: FEDERAL GIFT &...

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CHAPTER 17: FEDERAL GIFT & ESTATE TAX -The tax base is the value of the property transferred -The tax rates are progressive Joint Tenants & Tenants by the Entirety - Undivided interests - Rights of Survivorship (if A dies, B gets whole property) - Not included in Probate estate, but is included in gross estate (B owns A’s property the day A dies) Tenants in Common & Community Prop. - Also undivided interests - Death does not defeat an owner’s interest (if A dies, his ½ interest will pass to estate or heirs) FEDERAL GIFT TAX - Must have a DONATIVE intent on behalf of the donor - A prenuptial agreement is not considered a gift under state law but is considered a gift under the Federal Gift Tax - Transfer is NOT a gift if it is incomplete - becomes a gift upon completion -Revocable gift becomes a gift when grantor releases the power of revocation - Business vs. Personal Setting - Personal invariably means family is involved - If full and adequate consideration is involved, however, no gift occurs even if the transfer occurs in a personal setting Transfers Subject to the Gift Tax 1. Gift Loans - Interest element is treated as a gift - Employees Compensation w/ payment of interest - Shareholders Constructive dividends w/ payment of interest - Family and friends Payment of interest and gift of interest back to donee 2. Property settlements are not considered gifts 3. Disclaimers A disclaimer is a refusal to accept property. To be effective in avoiding gift tax consequences, the following conditions must be met: o the refusal must be in writing; o issued within nine months after the interest came into being; o the person making the refusal has not previously accepted the interest or any of its benefits; and, o the interest passes to another without any direction on the part of the one issuing the disclaimer. Other transfers that may be subject to the gift tax include the following: Creation of joint ownership. Transfers of life insurance policies. Exercise of a general power of appointment. These items are discussed in connection with the Federal estate tax Annual Exclusion - Only present interest can be excluded in the current year - $12,000 annual exclusion per parent Qualified tuition plans - Enjoy the best of all possible tax worlds. Although plan contributions are not deductible when made, income accumulates tax free and distributions are not subject to income tax (if used for education purposes). Some states allow deductions for contributions to their own plans. Grantor can claim up to 5 years of annual exclusions as to a plan contribution. No estate tax results if the grantor dies during the existence of the plan. Computing the Federal Gift Tax
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This note was uploaded on 04/07/2008 for the course BMGT 417 taught by Professor Cantor during the Fall '07 term at Maryland.

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bmgt417 final data sheet - CHAPTER 17: FEDERAL GIFT &...

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