ESTATE GIFT TAX P5 Essay

1844 Words Jan 30th, 2014 8 Pages
Problem 5
(1) Grantor creates a trust with income to Spouse for life, remainder to Child if living and, if not, reversion to Grantor or Grantor’s estate.
(a) If Grantor predeceases Spouse and Child, is Section 2037 applicable to the transfer?
No. Section 2037 is not applicable to the transfer.

Based on Section 2037, “ The value of the gross estate shall include the value of all property to the extent of any interest therein of which the decedent has at any time after September7, 1916, made a transfer, by trust or otherwise, if (1) possession or enjoyment of the property can, through ownership of such interest, be obtained only by
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Therefore, if the decedent’s reversionary interest immediately before his death exceeded 5% of the value of the property, the value of B’s remainder interest is includible in the decedent’s gross estate.

(d) Same as question 3c, above, except that S is also given a general power of appointment over the property.
Based on Section 2037(b), “…Notwithstanding the foregoing, an interest so transferred shall not be included in the decedent’s gross estate under this section if possession or enjoyment of the property could have been obtained by any beneficiary during the decedent’s life through the exercise of a general power of appointment which in fact was exercisable immediately before the decedent’s death. “

Because the decedent’s spouse is given a general power of appointment over the property, in this case, nothing included in the decedent’s gross estate.

(e) Grantor, age 50, creates a trust with income to be accumulated for twenty years or until Grantor’s death, whichever is earlier, then principal and accumulated income to Child if living. Grantor dies ten years later, survived by Child. Assume that if Child were not living, principles of local law would effect a reversion to Grantor’s estate.
Based on the double test of Section 2037, the Child can possess or enjoy the property without surviving the decedent. Because that the trust in created with income to be accumulated for twenty

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