Part 1:
Question 1: With regard to undivided ownership of property, what is the right of survivorship? When does it exist?
Question 2: What purpose does 2516 serve?
Question 3: What is the justification for the annual exclusion?
Question 4: At the time of Emile's death, he was a joint tenant with Colette in a parcel of real estate. With regard to the inclusion in Emile's gross estate under 2040, comment on the following independent assumptions:
A. Emile and Colette received the property as a gift from Douglas.
B. Colette provided the entire purchase price of the property.
C. Colette's contribution was received as a gift from Emile.
D. Emile's contribution was derived from income generated by property he received as a gift from Colette.
Question 5: Under what circumstances will the creation of a joint tenancy not constitute a gift when one of the tenants furnishes more of the consideration than the other (others)?
Question 6: Ramon owns a policy on the life of Winnie, with Lactrica as the designated beneficiary. Upon Winnie's death, the insurance proceeds are paid to Lactrica.
A. Are any of the proceeds included in Winnie's gross estate?
B. Does Winnie's death generate any tax consequences to Ramon?
Question 7: In the term of the QTIP (qualified terminable interest property) election, comment on the following:
a. Who makes the election?
b. What the election accomplishes.
c. The tax effect of the election upon the death of the surviving spouse.
Question 8: Property passing to a surviving spouse who is not a U.S. citizen is not eligible for the estate tax marital deduction. Is this statement always true? Explain.
Part 2:
Question 1: In 2008, Jim and Maude purchase a commercial annuity. Jim furnishes 75% of the cost, and Maude provides the balance. Under the terms of the contract, Jim is to receive $48,000 per year for his life. If Jim predeceases Maude, she is to receive $36,000 per year for her life.
a. If Jim dies first when the value of the survivorship feature is $400,000, how much, if any, is included in his gross estate?
b. Would anything regarding the annuity be included in Maude's gross estate when she dies five years after Jim? Explain.
Question 2: In each of the following independent situations, determine how much should be included in Burton's gross estate less than 2042 as to the various life insurance policies involved. Assume that none of the policies are community property.
a. At the time of his death, Burton owned a paid up policy on the life of Suzana, with Penny as the designated beneficiary. The policy had a replacement cost of $80,000 and a maturity value of $300,000.
b. Nancy owns a policy on the life of Burton ($300,000 maturity value) with Burton's estate as the designated beneficiary. Upon Burton's death, the insurance company pays $300,000 to his estate.
c. Four years before his death, Burton transferred a policy on his life ($300,000 maturity value) to Ann as a gift. Burton retained the power to change beneficiaries. At the time of the transfer, the designated beneficiary was Ann. Because Burton had never exercised his right to change beneficiaries, the insurance company pays Ann $300,000 upon Burton's death.
Question 3: Comment on hoe each of the following independent situation should be handled for estate tax purpose.
a. Before her death, Linda issued a note payable to her daughter in the amount of $100,000. Linda's never received any consideration for the note. After Linda's death, the daughter files a claim against the estate and collects $100,000 on the note.
b. At the time of her death, Saleha (a widow) owned 10 cemetery lots (each worth $5,000)k, which she had purchased many year before for herself and her family.
c. At the time of his death, Stanley was delinquent in the payment of back Federal income taxes. Stanley's executor pays the taxes from assets of the estate.
Question 4: At the time of his death in the current year, Jerome owned the following real estate:
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Tract A
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$1,000,000
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Mortgage on Tract A
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(200,000)
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Tract B
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700,000
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Mortgage on Tract B
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(100,000)
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Under Jerome's will, both tract of land pass to Janice (Jerome's surviving spouse). However, Jerome's will directs the executor to pay off the mortgage on tract B from the remainder interest passing to the children.
a. How much marital deduction will Jerome's estate be allowed?
b. What is the deduction for indebtedness under 2053?
Question 5: In 2000, Brad places in trust $500,000 worth of securities. Under the terms of the trust instruments, Wanda (Brad's wife) is granted a life estate, and on Wanda's death, the remainder interest passes to Brad and Wanda's children (as Wanda determines in her will). Upon Wanda's 8 years later, the trust assets are valued at $2 million.
a. How much, if any, marital deduction will be allowed on the gift made in 2000?
b. How much, if any, of the trust will be included in Wanda's gross estate upon her death?
Question 6: Assume the same facts as in question 5, except that Brad made the QTIP election when the trust was created. Further assume that Wanda has no choice as to which of her children will receive the remainder interest upon her death.
a. How much, if any, marital deduction will be allowed on the gift made in 2000?
b. How much, if any, of the trust will be subject to the Federal estate tax upon Wanda's later death?