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federal taxation 2019

Questions and Answers of Federal Taxation 2019

What are the tax advantages of a disclaimer?
What is the significance of a disclaimant reaching age 21?
Which transfers are subject to the gift tax?
What is a net gift?
What are the advantages of gift-splitting?
Why must the donor disclose his income tax basis in gifted property on the gift tax return?
What is a direct skip?
If Doria Oliva dies this year (2019), what estate tax is payable if the facts are: Adjusted gross estate Adjusted taxable gifts after 1976 Cift tax paid $11,710,000 100,000 6,000
Melinda transferred $500,000 to an irrevocable, inter vivos trust, leaving the income to Elmo, her husband, for his life, and the remainder to their daughter, Ingrid, if she survives her mother. What
Janet Smith transferred, in trust, $500,000 of Georgia Power Bonds to her younger sister, Bertha Jones. These bonds pay interest quarterly, and Janet reserved the income for her life. Janet was age
In each of the following cases, determine the amount includible in David's gross estate:a. An account balance of $200,000 in an IRA that the beneficiary immediately withdrew.b. A commercial annuity
Martha and Ludwig own their home in equal shares. Ludwig purchased the home with funds inherited from his grandfather, but Martha died first, leaving her half to Ludwig.What is includible in
Identify the following property interests, powers, and events:a. Gus buys a piece of land with his brother, Jack. Gus’s interest is 60 percent; Jack’s is 40 percent.b. Bruce died, leaving his
Evelyn gave a Fly more sailplane to her husband who is an enthusiast oft his sport for their wedding anniversary. Purchase cost was $37,000. She used her own funds from a separate checking account.a.
John and Janet Smith (husband and wife)purchased 1,000 shares of ABC Company common stock (NYSE) for $60,000 and immediately had it titled in the names of“Hugh and Donna Smith as joint tenants with
Joseph Grant's will provided that $1 million was to be placed in trust for his son, Steven, for life, with a remainder to Steven’s children per stirpes.What are the estate tax consequences to
In which of the following cases will the insurance proceeds be includible in Bertram’s estate?a. Bertram purchased the policy on his life 11 years ago and transferred all rights to it to Donna, his
On June 28, 1998, Bart Richards married Martha Joiner in Atlanta, Georgia. Because Bart was so happy that Martha became his wife, he purchased a home in Atlanta for $500,000 out of his own separate
Assume the same facts as in Problem 35. What is Martha's income tax basis in the house?Problem 35On June 28, 1998, Bart Richards married Martha Joiner in Atlanta, Georgia. Because Bart was so happy
Assume the same facts as in Problem 35, except that Bart and Martha resided in Dallas, Texas. What is Martha's income tax basis in the house?Problem 35On June 28, 1998, Bart Richards married Martha
Kermit Ames died on January 15, 2019. The fair market value of his house was $150,000 on his date of death. On July 15, 2019, the house was worth $130,000. Assume the alternate valuation date is
Assume the same facts as in Problem 38, except that the executor sold the house on May 2, 2019, for $138,000. What value is used by the executor in the estate tax return?Problem 38Kermit Ames died on
Assume the same facts as in Problem 38. What is the due date of the estate tax return?Problem 38Kermit Ames died on January 15, 2019. The fair market value of his house was $150,000 on his date of
Tom Parks died on March 15, 2019. The values of Tom's assets on March 15 and September 15, 2019, are as indicated below:The marginal federal estate tax bracket applicable to Tom’s estate is 40
Mr. John Henderson died on February 7, 2019. For each of the following items indicate the amount to be included in John’s gross estate. Unless stated to the contrary, assume that the items are
Which of the following items are deductible to the estate?a. Property taxes accrued at death on decedent’s home, held in a qualified joint tenancy.b. Interest accrued during estate administration
Because John was so happy that Dana had agreed to become his fiancee, on February 2, 2019, he gave Dana’s mother, Ethel,$15,000 in cash.a. Does this gift qualify for gift-splitting?b. Does this
Mortimer Piper transferred $5 million in trust to his wife, Mona, for life, then to their children in equal shares. After Mortimer died, Mona sold her income interest, then died 17 years later.a.
When Harry died, he left his surviving wife, Clare, the following:a. A remainder in a summer house, with a life estate left to his mother.b. A life estate and a general power of appointment in
In 2019. Mr. Colburn created a trust for the benefit of his five adult children and transferred $300,000 to it. The trustee may decide how much income to pay to each child each year. The trust will
John Henry Harris was left a 1962 Impala convertible by his uncle, Billy Bob Harris. After receiving the car, John determined that five cars in his family were too many. As a result, he disclaimed
Stanley Rosen’s cumulative lifetime taxable gifts amount to $250,000. The following year, he gives his favorite nephew $165,000 to open a liquor store.a. What is the taxable gift?b. What is the tax
The $15,000 exclusion would be available in which of the following transfers?a. Revocable transfer in trust to W for life, then to S.b. Irrevocable transfer in trust to W for life, then to S.c.
In the following independent cases explain whether the exclusion, the marital deduction, the charitable deduction, and gift-splitting are available.a. To mother for life, then to spouseb. To spouse
During the year your client, Big Jim Smith, gave $9,000 to 70 different donees. Has Big Jim made any taxable gifts during the year?
Isaac Binder purchased 1,000 shares of Deep-Freeze Inc. five years ago for $15,000.Two years before he died, he gave his son, Edward, 500 shares worth $6,000. He died during a bull market and willed
John Henry paid $60,000 in 2019 in medical bills to a doctor and a hospital for his invalid father. Has John Henry made any taxable gifts in 2019?
Under the annuity rules, all the following are includible in the decedent's estate, except:a. Alump-sum distribution from a qualified profit-sharing plan to a named beneficiary who waived forward
Asa rule, general powers of appointment are taxable, while special powers are not. The following powers are all special powers, except:a. ‘The power to appoint property to any person or entity in
During the current year, Dana makes the following cash gifts: $5,000 to her daughter,$9,000 to her brother, and $16,000 to a business partner. Does Dana need to file a gift tax return?
Which one of the following is not a deduction from the gross estate of a decedent?a. Unpaid income taxes on income received by the decedent during life.b. Interest payable on a loan incurred to pay
In the typical gift situation, the donor pays the gift tax. When a “net gift” is made, however, the donee promises the donor to pay any gift tax due. The following statements relating to net
Hugh Colburn’s financially destitute brother, Big Al, has a daughter named Violet. Hugh offers to pay for Violet's college education.In 2019, Hugh pays Columbia University’s annual tuition of
The generation-skipping transfer tax supplements the estate and gift taxes. The following statements about this tax are all true, except:a. ‘The generation-skipping trust is liable for any transfer
During 2019, Dale Davison made the following gifts:a. $30,000 to the political action group to re-elect Sam Nunn for the U.S. Senate.b. $25,000 to Scientific Atlanta Corporation (because he believed
When Howard Foth died in the current year, in addition to his $10,745,000 of certificates of deposit and investment property worth $200,000, the following facts were disclosed by the executor:a. In
Dave L. Jones, a calendar-year taxpayer using the cash method of accounting, was scared to death on Halloween night, October 31, 2019.Under the terms of the will, Dave devised and bequeathed all of
Mr. B died in 2019 at the age of 72.In his will, Mr. B made several bequests to the members of his family. The executor of B’s estate wants to know which of the following bequests constitute
Assume that the farm property shown below has been physically farmed by the decedent for the last thirty years. He willed it to his favorite son, who will continue to farm it.a. In each of the
On May 20, 1979, decedent’s husband, Hugh P. Hughes, executed a will which contained the following paragraph:Third: I give, devise and bequeath the 300-acre farm which I own near Macon, Georgia, to
John and Mary Larsson purchased a joint and survivorship annuity from the Life and Death Insurance Co. John paid for the annuity and died 11 years later, at which time Mary’s survivorship interest
Greene Corporation, a closely held corporation, is owned by Al Manx with 6,000 shares, Bob Barnes with 2,500 shares, and Cora Crowley with 1,500 shares. In the current year, Cora passed away.Asa
In 2019, Bert Richards transferred a $100,000 savings account to his wife in trust. The terms of the trust are that income is to be distributed annually to his wife, Mary Beth, the remainder to his
Based on the facts summarized below, use two gift Tax Forms 709 to complete the appropriate gift tax returns for Mr. and Mrs. Smith for calendar year 2018 for which each is required to file.They want
What three functions does distributable net income serve in fiduciary taxation?
What problem does the separate share rule alleviate?
Beneficiaries of estates and complex trusts are subject to the tier system of taxation. Explain what is meant by a first- and second- tier beneficiary.
When depreciation follows income of an estate or complex trust, explain the situation where wastage could occur.
In relation to trust distributions to beneficiaries, explain the 65-day rule.
What is a Schedule K-1? When is a trustee of a trust required to file a Schedule K-1 with the trust's federal income tax return?
Explain when loss carryovers can be taken from a trust's federal income tax return and be used on the trust beneficiaries' individual income tax returns.
Explain some tax avoidance techniques that could arise in regard to multiple trusts.
Hershel Barker was the president and majority shareholder in Bulldog Inc. He was a cash-basis taxpayer who reported his income on a calendar-year basis. On March 1, 2019, Hershel was killed in a
The trust instrument requires the trustee to distribute $40,000 annually to Carl Smith, the grantor's son. Any residual income may be distributed or accumulated for Bob Jones, Sam Smith, Earl Litt,
John Jefferson dies on November 10, 2019.John is on the cash basis of accounting for tax purposes. On November 29, 2019, a $4,000 paycheck covering the period November 1—November 8, 2019, is mailed
Jane Jaffe dies on October 12, 2019. On the date of death, Jane has a bank account that pays interest on a quarterly basis. On December 31, 2019, $3,000 ofi nterest income is credited to the bank
Richard Johnson held $50,000 of U.S. government savings bonds on the date of his death, December 11, 2019. The bonds mature in 2020. Unreported interest income on these bonds at the date of Richard's
An estate receives the following items of income and has the following deductions during the tax year 2019:The estate files an income tax return for the calendar year 2019. No distributions were made
Refer to the facts in Problem 31. If a $10,000 distribution of income was made to a beneficiary during the 2019 tax year, what is the 2019 federal income tax liability of the estate? Assume that the
Refer to the facts in Problem 32. How much of the $10,000 income distribution will be taxable to the beneficiary?Problem 32Refer to the facts in Problem 31. If a $10,000 distribution of income was
Mr. Hughes died in 2019. Pursuant to his will a testamentary trust was established. The trust instrument requires that 60 percent of the trust income be distributed currently to his wife Donna, for
In 2019, a trust has $2,000 of trust accounting income and $1,600 of distributable net income. The trust properly pays $1,100 to John Smith, a beneficiary, on February 3, 2019, which the trustee
John Henderson's will provides for the creation of a trust for the benefit of Holly Jones. Under the specific terms, the trust is required to distribute to Holly $50,000 cash and 1,000 shares of IBM
The trustee of the Astro trust makes a $15,000 charitable contribution to Penn Ohio University. The trust agreement is silent as to the specific type of income that should be used to pay the
The trustee of the James trust makes a $30,000 charitable contribution to the United Way. The trust had $20,000 of taxable income and $30,000 of tax-exempt income during the year. The trust agreement
A trustee distributes $10,000 of income to each of nine beneficiaries of the trust. The trust had $40,000 of tax-exempt interest income during the year and $80,000 of taxable income. The trust
The trustee of the Peterson trust is required by the trust agreement to distribute $5,000 yearly to Peter Peterson, $4,000 yearly to John Peterson, and $3,000 yearly to Sally Peterson. The trustee
An estate with distributable net income of $100,000 distributes the following assets to a beneficiary in December of 2019:a. What is the beneficiary's basis in the distributed assets?b. What would be
John and Ralph, two brothers who are over the age of 21, are beneficiaries of a trust created in 1983 by their father, Jim. At that time, Jim transferred securities and an apartment building to a
Which of the following items affects the charitable deduction of an estate or complex trust?a. Rental incomeb. Dividendsc. Interestd. ‘Tax-exempt interest
Which of the following deductions does not affect trust accounting income?a. Rental expensesb. Trustee’s commissions allocable to incomec. Interest expensed. ‘Taxese. ‘Trustee’s commissions
Which of the following items does not normally enter into the computation of distributable net income?a. Charitable deductionb. Capital gainsc. Trustee’s commissionsd. Rental income
An estate with depreciable property may not do one of the following:a. Pay income to first-tier beneficiariesb. Pay income to second-tier beneficiariesc. Distribute capital losses on terminationd.
A trust can have the following taxable yearend:a. September 30b. June 30c. December 31d. March 31
John Doe had earned commissions on life insurance sold prior to his death. The commissions of $20,000 were to be paid in five annual installments. The executor of his estate collected the first
John Henry died on May 1, 2019. When does his final 1040 have to be filed?
In problem 49, when does the estate's taxable year end?Problem 49John Henry died on May 1, 2019. When does his final 1040 have to be filed?
John and Mary Hughes file their income tax return on a calendar year basis. John dies on May 15, 2018. Mary remarries on July 4, 2019. Can Mary file a joint return with John for the taxable year 2019?
Thomas Able, a cash method, calendar-year taxpayer, died December 1, 2019. He is survived by his spouse, Nan. Tom was age 65 at the time of his death and Nan is age 66. They have no dependents, and
In 2019, Cabell Mapp passed away in Belle Haven, Virginia. Pursuant to his will, a testamentary trust was established. The trust instrument requires that $10,000 a year be paid to the University of
Howard Hayes was killed in a freak barbecuing accident at a local eatery called P.K.’s Barbecue Shack on October 28, 2017, in Wilson, North Carolina. He was survived by his wife, Helen (age 56),
When a trust terminates, there are, in most instances, terminating commissions that are charged by the fiduciary.The allocation of such expenses with respect to character of the income has spawned
The following court cases have helped to clarify the rightful recipient of depreciation of property held by an estate or trust.Read the following judicial decisions and prepare a brief written
In January 2019, Leon McLeod received a gift of a beach cottage valued at $250,000 from his great-uncle who owned a number of such buildings. The cottage was rented each year to college students who
The Hightown Council refused to increase the town budget. Robert Read was laid off from work on August 4, 2019. Earlier in the year he had been temporarily disabled from a job-related injury and had
On September 23, 2019, Mary Jones bought an annuity contract for $22,050 that will give her $125 a month for life, beginning October 30. Mary is 61 years old. Determine the exclusion ratio and the
Assume the same facts as in Problem 31, except that in January 2020, because of a cost-of-living increase, Don's annuity payment was increased to $175 per month. Determine the amount of the 2020
Philip Southerly purchases a joint and survivor annuity providing for payments of $200 per month for his life and, after his death, $100 per month for his wife's life. As of the annuity starting date
Peter Seaman, at age 45, purchased an annuity which will pay him $250 a month. for life once he reaches age 65. He paid in $25,000. At retirement, he will have quarterly payments from the annuity.
Linda Sue Carr worked for a large food brokerage firm. In January of this year she was terminated. After a court battle Linda Sue was reinstated in her job and received from the firm in November

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