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25.In 1985, Drew creates a trust with $1,000,000 of securities. Under the terms of the trust, Paula (Drew’s wife) is granted a life estate with remainder to their children. Drew makes a QTIP election as to the trust. Drew dies in 1992 when the trust is worth $1,500,000, and Paula dies in 2007 when the trust is worth $2,000,000. Which, if any, of the following is a correct statement?a.The trust is included in Drew’s gross estate when he dies in 1992.b.None of the trust is included in Paula’s gross estate when she dies in 2007.c.Drew gets a marital deduction of $1,500,000 when he dies in 1992.d.The $2,000,000 value of the trust is included in Paula’s gross estate when she dies in 2007.
The Federal Gift and Estate Taxes27-21e.None of the above.ANS: DNothing is included in Drew’s gross estate when he dies as he neither controls the trust nor owns its assets (choice a.). Drew gets a gift tax marital deduction when he creates the trust, not an estate tax marital deduction when he dies (choice c.). The value of the trust, due to the QTIP election, is included in Paula’s gross estate when she dies (choice d. as opposed to choice b.).PTS:1REF:p. 27-31 | p. 27-32 | Example 5726.Brooke made taxable gifts as follows: $300,000 in 1973, $200,000 in 1974, $600,000 in 1985, and $700,000 in 2001. In 2007, Brooke dies leaving a taxable estate of $3,000,000. Brooke’s tax base for applying the unified tax rate schedules (for estate tax purposes) is:PTS:1REF:Figure 27-227.Pursuant to Ward’s will, Lori (Ward’s sister) inherits property. Five years later Lori dies. Assume the estate tax attributable to the inclusion of the property in Ward’s gross estate was $50,000. The estate tax attributable to the inclusion of the property in Lori’s gross estate is $40,000. Lori’s credit for tax on prior transfers is:PTS:1REF:Example 59 | Example 6028.In 2003, Otto dies leaving an after-tax estate of $2,000,000. Under the terms of Otto’s will, this amount is placed in trust, life estate to Joyce (Otto’s daughter), remainder to Sylvan (Otto’s grandson). The executor of Otto’s estate elects to use the $1,000,000 exemption (the maximum available in 2003) for generation skipping transfer tax (GSTT) purposes. Joyce dies in 2008 when the trust is worth $3,000,000. One result of these transactions is:
27-2008 Comprehensive Volume/Test BankPTS:1REF:Example 63 | Example 65