Question1: On June 1, 2013, Mario entered into a contract to sell real estate for $1 million (adjusted basis $200000). The sale was conditioned on a rezoning of the property for commercial use. A $500,000 deposit placed in escrow by the purchaser was refundable in the event the rezoning was not accomplished.
After considerable controversy, the application was approved on November 10, and two days later, the sum of $950,000 was paid to Mario's estate in full satisfaction of the purchase price. Mario had died unexpectedly on November 1. Discuss the estate and income tax consequences of this set of facts if it is assumed that the sale of the real estate occurred:
1. After Mario's death
2. Before Mario's death
Question 2: Barry creates a trust with property valued at $7 million. Under the terms of the trust instrument, Michelle (age 48) receives a life estate, while Terry (age 24) receives the remainder interest. In the month the trust is created, the interest rate is 4.4%. Determine the value of Barry's gifts.
Question 3: Jacobs gives stock (basis of $900,000 and fair market value of $2.2 million) to Mandy. As a result of the transfer in 2013, Jacob paid a gift tax of $90,000. Determine Mandy's gain or loss if she later sells the stock for 2.3 million.
Question 4: Bill and Ellen are husband and wife with five married children and eight grand children. Commencing in December 2013, they would like to transfer a tract of land (worth $1,008,000) equally to their children (including spouses) and grandchildren as quickly as possible without making a taxable gift. What do you suggest?