500000 is includible in Brads gross estate Code Sec 2035d2 b A veto power over

500000 is includible in brads gross estate code sec

This preview shows page 14 - 16 out of 18 pages.

$500,000 is includible in Brad’s gross estate (Code Sec. 2035(d)(2)). b. A veto power over an incident of ownership is in itself an incident. Therefore, the entire policy amount is includible under Code Sec. 2040. c. The three-year rule applies and the proceeds are includible (Code Sec. 2035(d)(2)). a. Nothing is includible in H’s estate, but the adjusted taxable gifts would be added to the estate tax base. 65. (Policy and premiums.) b. Nothing would be included in H’s estate and the only adjusted taxable gift would be the policy itself. c. The proceeds would be included in H’s estate under Code Sec. 2025 (d)(2) since the transfer was made within three years of H’s death. The premiums would merge into the policy and not be separately included. d. If the policy was a preexisting one, the proceeds includible in H’s estate would be the same portion of total proceeds as H’s premium payments were in relation to total premiums paid. Thus, if H had paid 71 percent of the total premiums, 71 percent of the proceeds would be includible. This analysis breaks down, however, if the policy was purchased and transferred within the three-year period prior to H’s death and D paid all the premiums. Presumably the proceeds would be includible in H’s estate, but with a reduction for premiums paid by D. e. The value of the policy on W’s life, i.e., the “interpolated terminal reserve” (replacement cost), would be includible in H’s estate.
Image of page 14
707 Testbank © 2010 CCH. All Rights Reserved. Chapter 17 f. Nothing is includible in H’s estate since Code Sec. 2035(d)(2) only applies to policies on the decedent’s own life. There may, however, be an adjusted taxable gift to be added to the taxable estate. a. No marital deduction is allowed for a life estate, since the interest is terminable. However, a marital 66. deduction is available for the full fair market value of the stock portfolio if the life estate quali fi es for the QTIP election and one is made. b. Here no one has an interest in the trust except W. Therefore the marital deduction is available. c. This is referred to as an “estate trust.” Since all accumulated income and corpus is subject to W’s testamentary general power of appointment, the marital deduction is available. d. A remainder is not a terminable interest. Thus, the actuarial value of the future interest is deductible. e. No marital deduction is available since the bequest is conditional upon W moving out of her current home. f. Under the “executor purchase” rule, since the executor is required to buy W a terminable interest, the marital deduction is unavailable. g. A marital deduction would be available for the unexpired term interest. The term interest is not terminable since L did not receive the remainder gratuitously, in whole or in part. (Whether the remainder is includible in H’s gross estate is a more profound question, but the IRS probably would take such a stance under Code Sec. 2036(c) and Notice 89- 99.) a. Mona’s bequest to Clarence is terminable so that no marital deduction is available to Mona’s estate. 67.
Image of page 15
Image of page 16

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture