b. How much are Ginny's taxable gifts if gift splitting is elected? Solution:a. $22,000 = ($20,000 - $13,000) + ($28,000 - $13,000). The gift to her husband is not taxable. b. $1,000 = ($14,000 - $13,000). The gift to the daughter is now less than their combined gift annual exclusions. Ginny’s husband also has $1,000 in taxable gifts. 23. Gift Splitting In the current year, Marah gives $20,000 cash to Sam, $60,000 of stock to Craig, and $100,000 of bonds to Lynn. In the same year, Marah’s husband, Bryan, gives $120,000 of land to Jerry. a. What are Marah and Bryan’s taxable gifts if they do not elect gift splitting?b. What are the couple’s taxable gifts assuming the couple elects gift splitting?Solution:a. $248,000 combined taxable gifts. Marah: ($20,000 –$13,000) + ($60,000 - $13,000) + ($100,000 - $13,000) = $141,000. Bryan: $120,000 –$13,000 = $107,000. b. $202,000 combined taxable gifts. Marah and Bryan: ($30,000 - $13,000) + ($50,000 - $13,000) + ($60,000 - $13,000) = $101,000 each. The gift to Sam is less than their two annual exclusions when gift splitting is elected. 24. Gift Splitting

6 Solutions Manual for Taxation for Decision MakersDuring the current year, Cherie gives $30,000 cash to her daughter, Helen, and a remainder interest in investment land to her sister, Silvia. The remainder interest is valued at $40,000. In the current year, John, Cherie’s husband, also gives Dan $18,000 in marketable securities. What is the total amount of the annual gift tax exclusions available to Cherie and John for the current year if they elect gift splitting? Solution:$44,000 total gift exclusions = $26,000 (2 x $13,000) for $30,000 cash gift + $18,000 (2 x $9,000) for gift of marketable securities. The remainder interest is not eligible for the annual exclusion. a. A trust is established for the donor's 8-year-old daughter. The trustee can decide how much income to pay the daughter each year. At age 21, the daughter will receive all of the accumulated income and principal. b. A trust is established by transferring $10,000 each year for each of three beneficiaries who are given 30 days after receiving notice of the transfer to demand payment of the $10,000. c. All rights to a life insurance policy are given to the donor's son. Solution:a. This is a future interest, but it is eligible for the annual gift exclusion as a Section 2503(c) minor’s trust. b. Present interest for the $10,000 transferred each year. c. Present interest equal to the cost of a comparable policy at that date. 25. Present vs. Future Interest Determine whether each of the following situations involves the transfer of a present interest or a future interest. 26. Gift Planning On January 15 of the current year, Eileen, age 24, receives stock worth $26,000 as a gift from her parents. Her parents jointly purchased the stock six years ago for $12,000. During the year, Eileen receives $2,100 dividend income on the stock. In December, she sells the stock for $39,000. a. Assuming this is Eileen's only income for the year, and her parents are in the 35 percent marginal tax bracket, how much income tax does the family save as a result of this gift? b. Are there any transfer taxes as a result of this gift? Explain. Solution:a. $4,365 tax savings. For 2011, a zero tax rate applies to dividend income and long-term capital gains for individuals in the 10% or 15% marginal tax brackets; for single individuals that would include taxpayers with taxable income of less than $34,500 for 2011. Eileen has $2,100 dividend income and a long-term capital gain of $27,000 ($39,000 - $12,000 basis) resulting in $29,100 gross income.