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Describe the factors thst must be present for a transfer to be considered a taxable gift for gift tax purposes
1. The transfer of property must be completed, that is, a competent donor must transfer the property in a manner that divests the donor of dominion and control and places property within the control of the donee.
2. A competent donee must accept the gift.
3. The transfer must be for less than full and adequate consideration.
Steve gives wife Ellen a $100k lump sum settlement in divorce and she agrees to give up marital rights to his estate. What requirements must be met for Steven's transfer to escape gift tax liability?
1. The transfer must be pursuant to a written agreement between the two parties
2. The divorce must occur within a period beginning one year prior to and ending two years after the agreement.
John lends his son $15000 with interest then cancels the note. Are there gift tax implications. Explain.
In NONBUSINESS situations, forgiving a debt constitutes a gift. So in this case, ignoring the annual exclusion, there is a gift made to the son.
George pays his 24 year old daughter's NYC rent while she tries to get work as an actress. Has he made a gift?
Because George's daughter is an adult, payment of rent is not his legal obligation, so it constitutes a gift.
Marty gives daughter Mary $15000 with the requirement that she must transfer an automobile she owns to her brother Mark. The car is worth $11000. Has a gift been made, and to whom? Ignore the annual exclusion.
Ignoring the annual exclusion, Marty has given his daughter a direct gift of $4000, which is the excess of $15000 over the value of the car. He has also made an indirect gift of $11000 to his son.
Steve is the sole proprietor of a small firm with a net worth of $300,000. He makes his 12 year old daughter Lara a one-third partner.
A. Has a gift been made in this transaction?
B. Has a gift been made to Lara if she is an adult and performs bookkeeping services for the firm without a salary?
A. A gift has been made because Lara is performing no services for the partnership and has contributed no capital to its formation.
B. If a new partner contributes capital or valuable services in exchange for a share of the business, there normally would not be a gift. However, a gift is likely to exist in this case since the bookkeeping service would have a value of less than $100k. The gift value will be the $100k less the value of the services.
Alan and wife Sally are the sole shareholders in AB Corp, a real estate development company. Alan wants AB to transfer parcels of land to his kids for prices well below their true market value. What tax problems do you see with this?
1. The IRS might consider this to be a taxable dividend equal to the FMV of the real estate less the price paid by the kids.
2. Also, the IRS might see this as Alan and wife as making a gift to their kids that is equal to the amount of the dividend.
Joan owns a life insurance policy on her husband's life and names her children as beneficiaries because she has a large estate. What are the potential problems of this arrangement?
When the husband dies, the IRS could argue that Joan has made a constructive gift to her children equal to the full amount of the life insurance policy's death proceeds - as if she received the proceeds and then gave the money to her children.
A retired executive takes over and manages the business owned by his son during his son's illness. The son would have had to pay $10k for a comparable replacement but his father does not charge him. Has a gift been made?
The rendering of services is not considered to be a gift.
Describe the requirements necessary to have a qualified disclaimer of gifted property.
1. The refusal must be in writing
2. The writing must be received by the transferor, the transferor's legal representative, or the holder of the legal title to the property no later than 9 months after the later of (1) The date on which the transfer is made or (2) the date the person who is disclaiming reaches 21.
3. The person disclaiming must not have accepted the interest or any of its benefits.
4. Someone other than the disclaimant must receive the property and the disclaimant cannot influence the selection of the recipient of the disclaimed property.
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