2388. CHAPTER 19—FAMILY TAX PLANNING Question PR #1 Art makes a gift of stock in Drab Corporation which is not closely held but is traded in an over-the-counter market. The transactions involving this stock that occurred closest to the date of gift took place five trading days before (mean selling price of $120) and six days after (mean selling price of $100). Determine the fair market value of the Drab stock on the date of the gift. 2389. CHAPTER 19—FAMILY TAX PLANNING Question PR #2 Presuming the § 2032A election is properly made in 2011 what value is included in the gross estate in each of the following independent situations? Special Use Best Use Value Value Situation A $3 000 000 $3 900 000 Situation B 1 200 000 3 000 000 2390. CHAPTER 19—FAMILY TAX PLANNING Question PR #3 Carol inherits her father’s farm and the executor of the estate properly makes a § 2032A election. Five years later Carol sells the farm. It is determined that the election which allowed $800 000 in value to be excluded saved $160 000 in estate taxes. What are Carol’s tax options? Tax consequences? 2391. CHAPTER 19—FAMILY TAX PLANNING Question PR #4 At the time of her death in 2011 Lila owns 50% of the stock in Kingfisher Corporation with the balance of the stock held by family members. Kingfisher Corporation’s total profits for the past five years are $3 000 000 and the book value of its stock is $2 000 000. If 8% is an appropriate rate of return and goodwill exists what is a possible value for the stock to be included in Lila’s gross estate? 2392. CHAPTER 19—FAMILY TAX PLANNING Question PR #5 Jane is the founder of Citron Corporation and owns all of its stock both common and preferred. The preferred stock is noncumulative and possesses no preferential rights as to liquidation. In 1996 and when the common stock has a value of $1 200 000 Jane gives it to her adult children. She retains the preferred stock which at this time has a value of $300 000. In 2011 Jane dies. Values on the date of death are: $3 000 000 for the common stock and $500 000 for the preferred. a. What is the amount of the gift Jane makes in 1996? b. How much as to Citron Corporation is included in Jane’s gross estate in 2011? 2393. CHAPTER 19—FAMILY TAX PLANNING Question PR #6 Abigail makes a gift of stock (basis of $600 000; fair market value of $1 200 000) to her son Spencer. As a result of the transfer Abigail paid a gift tax of $120 000. What is Spencer’s income tax basis in the stock if the gift occurred in 2011? 2394. CHAPTER 19—FAMILY TAX PLANNING Question PR #7 Joseph makes a gift of securities (basis of $900 000; fair market value of $600 000) to his son Earl. As a result of the transfer Joseph paid a gift tax of $90 000. What is Earl’s income tax basis in the securities if the gift occurred in 2011? .
