2395. CHAPTER 19—FAMILY TAX PLANNING Question PR #8 In April 2010 Ed gives his mother Grace real estate (basis of $400 000; fair market value of $800 000). Ed paid no Federal gift tax on the transfer. Before Grace’s death in March 2011 she makes $40 000 in capital improvements to the property. The real estate is worth $840 000 when Grace dies. What is the income tax basis of the property to Grace’s heir under each of the following assumptions? a. The heir is Ed’s wife. b. The heir is Grace’s brother (i.e. Ed’s uncle). 2396. CHAPTER 19—FAMILY TAX PLANNING Question PR #9 Fred and Pearl always have lived in a community property state. At the time of Fred’s prior death in 2011 they held stock that cost them $600 000 but was valued as follows. Date of Death Six Months Later $5 400 000 $5 000 000 Under Fred’s will his half of the stock passes to their daughter Brandi. What income tax basis will Pearl and Brandi have in the stock if Fred’s estate: a. Elects the alternate valuation date of § 2032? b. Does not elect the alternate valuation date of § 2032? 2397. CHAPTER 19—FAMILY TAX PLANNING Question PR #10 In 1985 Scott and Dana acquire land for $600 000 with Scott furnishing $200 000 and Dana $400 000 of the purchase price. Title to the property is listed as equal joint tenancy with right of survivorship. Scott dies first in 2011 when the land is worth $3 000 000. What is Dana’s income tax basis in the property under each of the following assumptions? a. Scott and Dana are brothers. b. Scott and Dana are husband and wife. c. Scott and Dana are husband and wife and the land is community property. 2398. CHAPTER 19—FAMILY TAX PLANNING Question PR #11 Bob and Paige are married and live in a common law state. Bob owns some real estate (fair market value of $624 000) which they would like to give to their six adult married children. The spouses of their children (e.g. son-in-law daughter-in-law) are to be included in the gifts. Bob and Paige do not want to use any of their unified transfer tax credit. Assuming a constant annual exclusion in the amount of $13 000 suggest a viable way to structure the transfer. value of the property needs to be determined only once. 2399. CHAPTER 19—FAMILY TAX PLANNING Question PR #12 Ingrid’s projected adjusted gross estate is as follows. Farm operated by Ingrid current use value of $2 100 000 $3 000 000 Municipal bonds 900 000 CDs 500 000 Marketable securities 1 700 000 Total $6 100 000 a. Presuming that Ingrid expects her estate to elect the special use valuation of § 2032A what do you suggest? b. What could go wrong? 2400. CHAPTER 19—FAMILY TAX PLANNING Question PR #13 In February 2010 Taylor sold real estate (adjusted basis of $200 000) for $600 000. Under the terms of the sale the purchaser issued two notes of $300 000 each payable annually. In January 2011 and when the notes are worth $560 000 Taylor gives the notes to her son. What if any are Taylor’s tax consequences? 2401. CHAPTER 19—FAMILY TAX PLANNING Question PR #14 In each of the following independent situations describe the effect of the disclaimer procedure on Ron’s taxable estate. In this regard advise as to how much should be disclaimed by whom and whether a disclaimer should be made. Assume the year involved is 2011. a. Ron’s will leaves $5 200 000 to his adult son and the remainder ($900 000) to Rita (Ron’s surviving wife). b. Ron’s will leaves $8 000 000 to Rita (Ron’s surviving wife) and the remainder ($2 000 000) to his adult daughter. c. Ron’s will leaves $5 250 000 to Rita (Ron’s surviving wife) and the remainder ($500 000) to a qualified charity.
