Final Jeopardy
Bob died in year 3. His gross estate consisted of assets with a fair market value of $14,000,000. In his will, Bob leaves $1,000,000 to his spouse, $500,000 to his only daughter, and $200,000 to his favorite charity. Prior to Bob's death, he was involved in a lawsuit when one of his tenants slipped and fell at one of the rental properties owned by Bob. After his death, the personal representative settled the lawsuit for $750,000. The expenses to close Bob's estate were $50,000. Assume in year 3, the Federal estate exclusion amount is $11,000,000. By what amount, if any, does Bob's taxable estate exceed the $11,000,000 exclusion amount?
$14,000,000
-1,000,000 (marital deduction)
- 200,000 (charitable deduction)
-11,000,000 (exclusion amount)
- 800,000 (liability and expenses)
= $1,000,000
True or False: An estate tax is a tax on the right to receive property at death.
Answer: False - It is the right to pass property at death
What % is the gift tax rate?
40%
What form do you file for an Estate Tax Return?
Form 706
What form do you file for a gift tax return?
Monica and Daniel acquire a piece of land as Tenants in Common. Monica contributes $90,000 and Daniel contributes $10,000. Daniel dies a few years later when the FMV of the land is $600,000. What is the value of the land included in Daniel's estate?
10,000/100,000 = 10%
10% * 600,000 = $60,000
Which of the following transfer are treated as gifts for gift tax purposes?
$5,000 paid to a school for tuition for a cousin
$10,000 paid to bank for a mortgage for a nephew
$6,000 paid to a hospital for medical care of a grandmother
$10,000 paid to a bank for a mortgage for a nephew
John passes away. John owned a house jointly with his mistress. The mistress did not contribute anything to the cost of the home. The FMV of the house on John's date of death is $900,000. What is the value of the house in John's estate?
$900,000
Sonja gave her son Thomas stock with a FMV of $60,000. Her basis in the stock was $25,000. For gift tax purposes, what is the value of the gift that Sonja made to Thomas?
$60,000
Samantha dies on June 1st of year 1. Todd inherits publicly traded stock from Samantha which had a FMV of $6,000 on the date of her death. Samantha originally purchased the stock for $2,000. The stock is distributed to Todd on June 9, Year 4. If Todd sells the stock for $6,500 on the day he receives it, how much is his gain/loss?
$6,500 (sale price) - $6,000 (FMV on DOD) = $500
Bobbi and Marie would like to give as much as they can to their family without making a taxable gift. The donees will be their five married children (and spouses) and 7 minor grandchildren. Assume an annual gift tax exclusion of $17,000. Presuming the election to split gifts is made, how much can be given?
$17,000 * 2 = $34,000 for each gift
$34,000 * 10 + $34,000 * 7 = $578,000