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29 Cards in this Set

  • Front
  • Back
Parallel GRATs
105 day rule
One doesn't have to pay annuity payments from GRAT until 105 days after payment date. Opportunity to leverage.
7520 rate
7520 governs both rates
7520 rate is 120 percent midterm afr

7520 rate is minimal
afr is a reasonable rate
Transfer for value rules
Distributable Net Income. In essence the maximum amount the trust can distribute and receive a deduction.
Income with Respect to a Decedent. Assets that are subject to both income and estate taxes.
Annuity Trust v. Unitrust
An annuity payment is a fixed percentage of the initial value of the assets contributed.

A unitrust payment is a fixed percentage of the value of the assets owned by the trust each year.
Is cash donated to charities deductible from income tax?
- To A charities, deductible but limited to 50% of AGI, rest carried forward 5 year
- To B charities (ie: private foundations), deductible but limited to 30% of AGI
- Corporate taxpayers are limited to 10% of taxable income
To what extent is property donated to charity deductible from income tax?
- LTCG to A charities are generally deductible at FMV, limited to 30% of AGI (carried forward).
- Limited to BASIS if: 1) not LTCG, 2) B charity (FMV if publicly traded stock), 3) elected to (50% limit), or 4) donation of TPP for unrelated purpose
Terminable interest
Will terminate or fail as the result of: - passing of time,
- an event or contingency occurring,
- the failure of an event of contingency.
Cannot qualify for marital deduction unless QTIP
Five deductions allowed from gross estate to arrive at taxable estate:
1) Funer and admin exp (IRC 2053),
2) casualty losses (IRC 2054),
3) charitable transfers (IRC 2055),
4) marital deduction (IRC 2056), and
5) family bus interests (IRC 2057).
Five credits against estate tax:
1) Unified credit (IRC 2010)
2) state death taxes (IRC 2011)
3) Gift tax pre 1977 trans (IRC 2012)
4) Estate tax prior trans (IRC 2013)
5) Foreign death taxes (IRC 2014).
Types of buy sell agreements:
Cross purchase: Owners buy each other out.

Redemption: Entity buys out owners
Three appraisal methods
When do the tax years start for estates and trusts?
Generally estates are on fiscal years, and trusts are on calendar years (certain exceptions, ie: 645 election).
When does a trust or estate not have to file a Form 1041 due to low income?
$600 or less in income ???
If securities are sold before alternate valuation date, do you use actual sale price or the median average of the day for the valuation?
You use the actual sale price, if possible

Rev. Rul. 70-512
Does a limited partnership have to have the words "Limited Partnership" spelled out in its name (not lp, etc.)?
Asset allocation: When should you allocate a 401K or IRA to the children, and when to the spouse, and when to the trust?
- Spouse: First marriage and young children. Alt: T (or if already beneficiary. Alt: C). Remember that if spouse predeceases, w/o alt, it will go to estate and cause probate.
- Children: Generally best to kids if no bypass, if children are older and marriage is stable (consider what if child dies with kids?) (Alt: trust?)
- Trust: Want to avoid, but second marriages and children from two marriages or trust has restrictive covenants (ie: not until 22) or when there is a bypass trust to fund.
Interpolated terminal reserve
Approximately a life insurance policy's cash value
Universal Life insurance
Owner of policy can adjust the application of the premium between the amounts needed to pay for the death benefit and the portion of the investment for cash value depending on need
Do you receive a full step up in basis for gifts?
No, gifted property generally carries a tax basis equal to the basis the property had when it was owned by the donor
Has Massachusetts adopted Gallenstein?
No, it splits all joint interests 50/50
Norma C. Treat and Estate of Robert H. Treat v. Comm'r, ATB F232197 (1998)
Dirty Asset
An asset which takes taxes with it to its new beneficiary, ie: IRAs or 401Ks. It's better to give these to charity first. Commercial annuities have a lesser tax bite, because return of amount paid to obtain is not taxed. So that's preferable to give.
Can GRAT annuity payments be made with a note?
Reg. 25.2702-3
Conservation easements
How much insurance should one have?
Benchmark 10 times income
or enough to pay estate tax without liquidating important assets
Separate shares
Add Flashcards about foreign spouse gift and estate tax rules