Question 1: The year is 2016. T transferred an investment portfolio to a Crummey trust (i.e., each beneficiary has the right to demand a distribution the amount of the annual gift tax exclusion for that year), retaining a term-certain income interest for herself (i.e., she will receive income from the trust for a specified period of time). At the end of the income interest, the portfolio will be distributed to 15 (remainder) beneficiaries. Each of the 15 beneficiaries received and acknowledged receipt of a properly drafted notice of his or her Crummey demand right. This current interest satisfies the requirements that allow the annual exclusion(s). The investment portfolio is worth $800,000 when transferred into the trust, and the value of the income interest retained by T is $300,000. The creation of this trust results in a taxable gift in the amount of?
Please show calculations and explain why your answer is correct (feel free to expand the answer section between questions as needed)
Question 2: Uncle has agreed to finance Nephew's college education ($30,000 to $40,000 annual costs for 4 years). However, Uncle is unsure of whether to (1) write checks to Nephew, which he will then use to pay his educational costs or (2) write checks directly to the university that Nephew attends. Nephew is very trustworthy; so, the issue is not whether the money will really be spent on education if the check is written to Nephew. From a purely gift tax perspective, which method of funding Nephew s education is better? Why?
Question 3: The year is 2016. T, who is married, plans to make equal cash gifts to his father and mother (i.e., 2 recipients). T's spouse is willing to consent to a gift-splitting election under §2513. What is the maximum total gift to his parents that T can make without having a taxable gift result for either himself or his spouse (i.e., without having to apply any of either spouse's UTCr to the taxable gift)?
Question 4: Father, Son, and Daughter formed an investment group to purchase income-producing real estate. Father paid the entire $2 mil. cost of the real estate purchase and then added Son and Daughter to the title as joint owners with right of survivorship (i.e., Son and Daughter provided nothing toward the purchase). 20 years later, Father died and Son and Daughter became the equal owners of the real estate, which was worth $15 mil. on the date Father died. How much, if any should be included in Father s gross estate?
Question 5: Sometimes gifts occur when, or soon after, certain purchases are made.
Father, Son, and Daughter formed an investment group to purchase income-producing real estate. Father paid the entire $2 mil. cost of the real estate purchase and then added Son and Daughter to the title as joint owners with right of survivorship (i.e., Son and Daughter provided nothing toward the purchase).
What, if any, is the amount of the taxable gift that results from Father's adding Son and Daughter on the title of the real estate?
Question 6: In 20x1, T gave her $1 million life insurance policy (cash surrender value at that time $100,000) to her son. T retained no powers of appointment or other rights of ownership with respect to this policy. No gift tax was due on this gift. T died unexpectedly 18 months later, and the proceeds of the life insurance policy was paid to Son.
Explain: With respect to this situation, how much, if any, is included in T's gross estate? What is the statutory authority for your answer?
Does Son have any income tax consequences as to the $1 million death benefit received?
Question 7: T has several nephews and nieces. T is in her late 50's and has a life expectancy of 20-30 years. As part of T s estate planning strategy, each year for the next several years she intends to make gifts valued at $14,000 to each nephew or niece. T is uncertain as to whether to make gifts (1) of stock that is likely to decline in value in the future or (2) of stock that is likely to increase in value in the future. Regarding the impact on T's eventual taxable estate:
a. There would be no material difference which kind(s) of stock T gifted.
b. It would be better to gift the stock that will decline in value.
c. It would be better to gift the stock that will increase in value.
d. It cannot be determined based on the facts presented which type of stock would be better to gift.
Question 8: Explain, in a paragraph why your answer in question number 7 is correct.