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35 Cards in this Set
- Front
- Back
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Know the tax consequences where an individualtransfers property in a loss position including how the dual basis rule isapplied in a subsequent sale of the property by the Donee. (Chapter 5) |
Not sure yet pg 166 |
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Be able to calculate total taxable gifts for ayear. In determining taxable gifts, makesure you adjust for the annual exclusion and qualified transfers. (Chapter 5) |
Not sure yet |
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Be able to calculate penalties for failure to file estate tax return andfailure to pay the estate tax due on time. Remember the failure to pay penalty reduces the failure to file penalty.(Chapter 6) |
Failure to pay= .5% X estate tax due amountX months (any fraction of month) Failure to file= 5% x estate tax x months –failure to pay Ex. Failureto pay= .5% x 10,000 x2= 100 Failure to file=5% x 10,000 x 2 = 1000 minus 100= 900 Total penalties= 100 + 900=1,000 |
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Beable to recognize if and when an insurance policy and an Annual Exclusion gifttransferred by a decedent during his life is included in his gross estate whenhe dies. (Chapter 6) |
If the proceeds were receivable by the decedentsestate or the decedent possessed any incident of ownership in the policy thenthe death benefit is included in the decedents gross estate |
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Beable to determine the type and amount of gain on the sale of an asset acquiredfrom a decedent. For this question youwill need to recognize the income tax basis in the hands of the legatee.(Chapter 6) |
When an heir receives property from a decedent, the adjustedbasis of the property for income tax purposes is the property’s fair marketvalue, this is referred to as a step up in basis Step up in basis doesn’t apply to qualified plans such as401k |
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Knowthe characteristics of a SCIN including the basis of the property sold in thehands of the purchaser. (Chapter 7) |
A SCIN provides the buyer an adjusted basis in theproperty purchased equal to the agreed upon purchase price of the propertyate |
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Beable to recognize how much is included in a gross estate where the decedentmakes a transfer of assets to an irrevocable trust and pays a gift tax.(Chapter 8)l |
When assets are transferred to an irrevocable trustthe asset is not includible in the gross estate because the asset can no longerbe controlled, used, benefited by the grantor. At this moment there will be a gifttax which will have to be calculated if above the gift tax exemption |
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2503(b)Trust |
Trust for the lifetime of the beneficiary, buttrust must make income distributions to beneficiary annually, thus at least theinterest and dividends must be distributed, once distributed the income can beplaced in custodial account for child, gift tax exclusion is equal to thepresent value of income interest that child will receive |
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- 2503(c)Trust |
Allows income to be accumulated in the trust and allows the grantor to qualify theentire gift in the trust for the annual exclusion, can only be one beneficiary,trust must terminate when beneficiary is 21 or at least be given right toreceive all trust assets |
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- TottenTrust |
not really a trust but rather bank account with a payable on death beneficiaryclause, this allows the assets to avoid probate |
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Intentionally Defective Grantor Trust. |
Purposeis to transfer appreciating asset to family member while the trust income isretained by the grantor, thus reducing his the grantor’s estate andtransferring a tax free asset to the family member in the trustֲ
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Know the characteristics of a Grantor Retained Annuity Trust and the taxconsequences of a transfer to a GRAT. (Chapter 8) |
Remainder interest is subject to gift tax, remainderinterest is pv of expected future annuity payments- fmv of original transfer tograt, The longer the term of the grat annuity the larger the pv annuitytherefore the less that will be subject to gift tax, but if the grantor diesbefore than the whole amount will be includible in gross estate, incometax from grat is passed to the grantor sothe buyer gets income tax free growth |
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Know the characteristics of a Qualified PersonalResidence Trust and the tax consequences of a transfer to a QPRT. (Chapter 8) |
A special form of GRIT in which the grantor transfers his home to the QPRT and receives "use" of the personal residence as the annuity. The remainder interest of the trust passes to a non-charitable beneficiary. - The transfer of a residence to a QPRT is a taxable gift that would not qualify for the $14,000 annual gift exclusion as it is treated as a future interest transfer. The valuation of this transfer is dependent upon several factors including term of the trust, life expectancy of the grantor and an interest rate factor based upon an IRS §7520 rate for the month of the transfer. QPRTs work best in a high interest rate environment as a higher rate reduces the taxable gift portion of the transfer.The older the grantor and the longer the trust term, the smaller the taxable gift. However, the grantor must outlive the trust term. Accordingly, personal and family medical history of the grantor should be a focus of QPRT planning. |
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Be able to calculate how much will transferredto a testamentary Bypass Trust where the decedent made taxable gifts to aninter vivos Bypass Trust during life. (Chapter 8 |
Transfer 5,340,000 in assets to an inter vivos bypass trust and shield the transfer with the applicable gift tax credit amount. once this is accomplishes, all future growth and appreciation in the property that is transferred to the bypass trust escapes federal estate taxation at the decedents death. Example Pg. 328 |
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With regard to a charitable donation, be able torecognize when a Form 8283 is required to be filed. Also, be able to recognize when acontemporaneous written acknowledgement is required. (Chapter 9 |
Form 8283 is required to to be filed when the value of the donated item is $5,000 or less but more than $500 Contemporaneous written acknowledgement by the donee organization is required when an individual contributes cash or property valued at $250 or more per donation. |
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Be able to distinguish the benefits anddrawbacks of a CRAT, Charitable Gift Annuity, CLAT and CRUT, and be able torecognize which charitable trust is appropriate under a given set of facts.(Chapter 9) |
N/A |
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Be able to calculate capital gain and/or loss ona bargain sale to charity. For thisquestion you will also need to determine the basis of property acquired from adecedent. (Chapter 9). |
The adjusted basis of the property is allocated pro rata between the sale element and the charitable contribution element. |
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Be able to calculate the income tax deductionwhere property is transferred to charity in exchange for a single life annuity.(Chapter 9 |
N/A |
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Beable to recognize which property transfers at death would be a qualifyingproperty transfer for purposes of the unlimited marital deduction. For this question you need to know therequirements for a property transfer to qualify. (Chapter 10) |
N/A |
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Be able to recognize situations in which using aQDOT would be appropriate. (Chapter 10 |
N/A |
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Knowthe purpose of the unlimited marital deduction and be able to recognize whenits use would be appropriate. (Chapter 10) |
Defers payment of estate tax Creates the ability to fund the estate of the second-to-die spouse Limitations NET VALUE: only the assets the surviving spouse actually receives are deductible for the unlimited marital deduction |
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Beable to recognize the appropriate strategy where an individual wants totransfer as much as he can to his wife while still making the most of hisapplicable estate tax credit, making sure his wife has access to his net worthand that the children get whatever is left. (Chapter 10) |
N/A |
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Knowhow much a spouse can transfer to a non US citizen spouse without using anyapplicable gift tax credit and without incurring any transfer taxes. (Chapter10) |
By using the QDOT the non-citizen spouse annual exclusion is 147,000 |
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Be able to recognize circumstances where thedeath benefit proceeds from a life insurance policy are included in adecedent’s gross estate. (Chapter 11 |
`N/A |
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Knowthe characteristics of a joint and survivor life insurance policy. (Chaptet 11) |
N/A |
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Be able to recognize incidents of ownership in alife insurance policy. (Chapter 11) |
N/A |
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Know the purposes and advantages of anIrrevocable Life Insurance Trust. (Chapter 11) |
-An irrevocable trust that owns and holds life insurance on its grantor's life -Provide for thesurviving spouuse -Prevent property from being included in the gross estaate of either spouse -Protect assets from the claims of the beficiaries' creditors |
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Knowthe income and estate tax consequences that could result where death proceedsare paid when the insured dies. (Chapter 11) |
N/A |
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Beable to determine whether or not the following post-mortem elections would beappropriate given a specific set of facts (Chapter 12):- Portability- Alternate Valuation Date- Disclaimer |
Portability - The ability of the executor of an estate to timely file Form 706 to transfer the decedent's unused credit exclusion to the surviving spouse Alternate Valuation Date - An alternate date, other than the date of death, to value a decedent's gross estate. The alternate valuation date is either 6 months after the date of death, or if the asset is disposed of with six months of the date of death, the assets's disposition date. Disclaimer -Irrevocable and unqualified refusal to accept a gift or bequest -The disclaimer allows assets to pass to other heirs or legatees without additional transfer tax -Requirements --Must be in writijng -Must be madde withing 9 months of the date on which the traansfer creating the interesst was made or the day on which the disclaiming party reaaches the age of 21 --The disclaimant cannot specify the party to whom the property will be transferred as a result of the disclaimer --The disclaimant cannot accept any interest or benefit in the porperty prior to disclaiming |
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Be able to determine whether or not the following post-mortem elections would be appropriate given a specific set of facts (Chapter 12): Alternate Valuation Date- A Section 303 stock redemption- QTIP election- Special Use Valuation- Installment payment of federal estate taxes |
N/A |
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Knowthe requirements for the application of a Section 303 redemption. (Chapter 12) |
To qualify for a section 303 redemption, more than 35% of the decedent's adjusted gross estate must consist of the closely held business interest. --More than 35% of the decedent's adjusted gross estate must consist of the closely held business interest --In the event that the decedent owned interests in several closely held businesses, the FMV of all of the closely held business interests can be aggregated to meet the 35 percent test provided that the decedent owned at least 20% of each company's outstanding stock. --The shareholder redeemed must be responsible for the payment of the administration expenses and funeral expenses |
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Beable to recognize transfers that would and would not be subject to theGeneration Skipping Transfer Tax. (Chapter 13) |
N/A |
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Knowthe characteristics of the Generation Skipping Transfer Tax. (Chapter 13) |
An excise tax imposed in addition to any gift or estae tax, on the transfer of property to a donee other than a spouse who is 2 or more generations younger than the donor. |
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Be able to calculate the amount of generationskipping transfers after deduction for GST annual exclusion, if applicable(14,000 in 2014). (Chapter 13) |
N/A |
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Be able to recognize Skip Persons for purpose ofthe generation skipping transfer tax. Also, know the amount of the GSTT exemption and the exceptions to theGSTT. (Chapter 13 |
N/A |
