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54 Cards in this Set
- Front
- Back
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Gift Tax and Estate Tax refer to respectively?
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Life time transfers and dispositions of property resulting from the transferor's death
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What type of tax is Estate Tax?
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Wealth Transfer Tax
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Does Real Estate in SC go through probate?
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No
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Testamentary Transfers
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A transaction if the transferors control or enjoyment of the property in question ceases at death, not before death
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Which family controlled corporations don't go through probate?
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Property Held, Family Owned LLCs
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Estate Tax is basically?
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Taxing net worth at death.
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Deductions
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1. Expenses and Debts
2. Casualty and theft losses 3. Transfers to the decedent's spouse 4. Transfers to charitable organizations 5. State death taxes |
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Adjusted Taxable Gifts and Tax Base
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Adjusted taxable gifts are added to the taxable estate to determine the amount of the estate tax base
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Tentative Tax on Estate Tax Base
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Maximum tax rate of 45% will apply to tax bases exceeding $1.5 million for both estate and gift tax purposes
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If the rate schedule for the year of death differs from schedule for applicable year?
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The tax on taxable gifts is determined by using the rate schedule in effect for the year of death
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Unified Credit
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Credit = $1,455,800
Exemption Equivalent = $3,500,000 |
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Date of Death Valuation
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All property included in the gross estate is valued at either its FMV on the date of death or the alternate valuation date
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Fair Market Value
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The price at which the property would change hands between a willing buyer and willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts.
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Listed Stocks
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Stocks traded on a stock exchange are valued at the average of their highest and lowest selling prices on the date of death.
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Interest in Firms Whose Stocks is Not Publicly Traded
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Courts often grant a discount for minority ownership
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Valuations for Real Estate
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Regulations do not adress valuation approach. Appraisal literature discusses three techniques for valuing real property:
comparable sales reproduction cost capitalization of earnings |
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Life Annuity
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Payment until Death
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Alternate Valuation Date
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Six months after the date of death. If property is sold or dsitributed before 6 monthes, the altnerate valuation date is the date of sale.
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If you don't have an estate can you elect alternate valuation date?
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No
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Why is alternate valuation date made?
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Only if it decreases the value of the gross estate and the estate tax liability
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Probate Estate
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An encompassing property that passes subject to the will and is subject to court administration.
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Property In Which the Decedent Had an Interest
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Provides that the gross estate includes the value of all property the decedent beneficially owned at the time of death
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Dower Rights
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A widows interest in her deceased husband's property.
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Curtesy Rights
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Interest in his deceased wife's property.
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What do Dower or Curtesy Rights Entitle?
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The right the suriving spouse to a certain portion of the decedent spouse's estate, even though the decedent may have willed a smaller portion to the spouse.
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Laws in Certain States pertaining to Dower Rights
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Widows are entitled to receive one-third of their deceased husband's property. The husbands gross estate does not exclude his widow's dower rights in his property.
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Transfer Provisions
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They apply if the decedent made a transfer while alive of a type specified in the IRC section in question, and the decedent did not receive adequate consideration in money or money's worth for the transferred interest.
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Gross Up Rule
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The donor's gross estate is increased by any gift tax that or she, or his or her estate pays on any gift the decedent or his or her spouse makes during the three-year period ending with the decedent's death.
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2 Transfers With Retained Life Estate
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1. Kept possession or enjoyment of the property or the right to its income.
2. Retained the power to designate the person who is to possess or enjoy the property or to receive its income. |
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Reversionary Interests
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The chance exists that the property will pass back to the transferor under the terms of the transfer
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Transferors Gross Estate
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Include earlier transferred property if the decedent stipulates that another person must survive him or her to own the property and the value of the decedents reversionary interest exceeds 5% of the value
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Revocable Transfers
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Provision also taxes all transfers over which the decedent has, at the time of his or her death, the power to change the enjoyment by altering, amending, revoking, or terminating an interest
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Ownership Involving Persons Other Than Spouses
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When persons other than spouses or persons in addition to spouses own property own property as joint owners, the amount includible is determined by the consideration-furnished test.
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Consideration Furnished Test
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Property is included in a joint owner's gross estate in accordance with the portion of the considerration he or she furnished to acquire the property.
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Qualified Joint Interest
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If spouses are joint owners, the decedents gross estate includes one-half the value of the qualified joint interest.
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Power of Appointment
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The authority to designate the owner
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General Power of Appointment
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Results in an addition to the gross estate. Being exercisable in favor of the decendents estate means there is no restriction on the powerholders ability to specify the persons to receive the property.
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What governs appointment powers?
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"Ascertainable standard" are free of estate tax consequences because they may be exercised solely for purposes of the decedents health, support, maintenace, or education.
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Life Insurance
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Policies owned by the decedent are taxable. Includes the value of the policies on his or her own life if the proceeds are receivable by the executor or for the benefit of the estate if the proceeds are receivable by the executor or for the benefit of the estate.
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5 Deductions
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1. Debts and Funeral and Administration Expenses
2. Transfers to spouse 3. Transfers to charitable organization 4. Casualty and theft loses 5. State Death Taxes |
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Examples of Administration Costs
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1. Executors Commissions
2. Attorneys Fees 3. Court Costs 4. Accountant Fees 5. Appraisers Fees 6. Expenses of Preserving and Distributing the Estate |
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Examples of Casualty Losses
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1. Fires
2. Storms 3. Earthquake |
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QTIP Transfer
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A martial deduction for transfers of qualified terminable interest property.
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QTIP Property
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Property that passes from the decedent, in which the surviving spouse has a qualifying income interest for life, and to which and election applies.
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What do you QTIP provisions allow for?
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A postponement of the taxable event until the second spouse dies or disposes of the interest by gift.
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What happens if a taxable event is postponed?
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The property is valued at its FMV as of the date the second spouse transfers the property by gift or at death
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Credit For Tax on Prior Transfers
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Credit available for the estate taxes paid on prior transfers reduces the cost of having property taxed in more than on estate in quick succession.
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Foreign Death Tax Credit
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Estate is entitled to a credit for some or all of the death taxes paid to a foreign country for property located in that foreign country and included in the gross estate.
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Interests in Closely Held Business
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Executor must pay a portion of the estate tax in as many as ten annual installments in certain situation.
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3 Provisions for Interest in Closely Held Business
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1. The portion of the estate tax that can be paid in installments is the ratio of the value of the closely held business interest to the value of the adjusted gross estate.
2. The first of the ten allow installments generally is not due until five years after the due date for the return. 3. Interest on the tax due is payable annually, even during the first five years |
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How does an estate reduce income tax upon a shareholders death?
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Treat a redemption as an exchange even if it doesn't satisfy requirements.
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Special Use Valuation of Farm Real Property
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Estate must meet a number of requirements before the executor can elect the special valuation rules.
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Generation Skipping Transfer
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1. Provides interest for man than one generation of beneficiairies who are in a younger generation than the transferor
2. Provides an interest solely for a person two or more generations younger than the transferor |
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File Date for Estate Return
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9 months after date of death
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