Questions -
Q1) In 1990, Simon and Susan acquired realty for $1 million, with Simon furnishing $400,000 of the purchase price and Susan providing the balance. Title to the property is listed as "Simon and Susan, joint tenants with right of survivorship." In the current year, Susan died first when the realty was worth $4 million. How much is included in her gross estate under the following circumstances?
(I) Simon and Susan are brother and sister.
(II) Simon and Susan are husband and wife.
Q2) The NRBE Trust is a simple trust that correctly uses the calendar year for tax purposes. Its income beneficiaries (Nancy, Rita, Betty, Ernie) are entitled to the trust's annual accounting income in shares of one fourth each. For the current calendar year, the trust has ordinary business income of $30,000, a long-term capital gain of $20,000 (allocable to corpus), and a trustee commission expense of $4,000 (allocable to corpus).
(I) How much income is each beneficiary entitled to receive?
(II) What is the trust's DNI?
(III) What is the trust's taxable income?
(IV) How much is taxed to each of the beneficiaries?
Q3) You are the director of a Washington, D.C., think tank focusing on tax and economic policy issues. You were recently (and informally) contacted by staff of the Congressional Joint Committee on Taxation to weigh in on a number of issues currently under consideration by the committee. In particular, the committee asked you to reflect upon the following proposed changes and issues.
(I) The committee has proposed phasing out the PAD for domestic corporations.
(II) The committee has considered separating the gift and estate tax systems from one unified system to two completely independent systems.
(III) The committee is intrigued by the idea of eliminating the double taxation of corporate earnings. The members are, however, unsure about which level of taxation should be eliminated.
The committee would like you to summarize your conclusions regarding the potential effects-both good and bad-of these potential changes. In formulating your answer, discuss all of the possible tax and economic implications that you see arising from these transactions on all taxpayers.