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Tax Return Assignment 1
This is the first of 3 tax returns that you will be preparing in this course. This first return will assess your ability to properly handle taxable transfers using the 2513 election to split the gifts. Consider the following scenario:
Robert F. and Angela M. Smith, ages 70 and 65, are retired physicians who live at 824 Randolph Street, Arlington, Texas 76099. Their 3 adult children (Albert Smith, Daniel Smith, and Ashley Turner) are mature and responsible people. The Smiths have heard that some in Congress have proposed lowering the Federal gift tax exclusion to $3 million. Although this change likely will not occur, the Smiths feel they should take advantage of the more generous exclusion available under existing law. Thus, the Smiths make transfers of many of their high value investments. These and other gifts made during 2016 are summarized below.
Condominium located in Dallas (TX) acquired in 1999, cost $1.2 million, to Albert, Daniel, and Ashley as equal tenants in common.
Office building, located in Austin (TX) built in 2001, cost $1.8 million, to Albert, Daniel, and Ashley as equal tenants in common.
Vacation ranch in San Antonio (TX) inherited by Robert from his father in 1996, value then $900,000, to Albert, Daniel, and Ashley as equal joint tenants with right of survivorship.
Angela used her separate property to reimburse her father (Mark Johnson) for his heart bypass operation.
Paid for daughter's (Ashley's) wedding to Samuel Richards.
Robert used his separate property to purchase a new automobile (Mercedes) as a graduation present (from medical school) for his favorite niece (Irene Jackson)
Prepare 2016 gift tax returns (Form 709) for both of the Smiths to compute the total taxable gifts (line 3) for Robert and Angela. Stop with line 3 of page 1, but complete pages 2 and 3 of the return. An election to split gifts is made. The Smiths have made no taxable gifts in prior years.
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