Question
Darleen lives in Arizona and acquired all of her property interests while living there. She owns a primary residence worth $12.2 million. She owns a
Darleen lives in Arizona and acquired all of her property interests while living there. She owns a primary residence worth $12.2 million. She owns a condo near a Colorado ski resort worth $800,000. Mortgages on the two homes equal $600,000. Darleen inherited money from her father which she deposited in a separate account. She used this money to acquire commercial property for an art gallery. The FMV of the commercial property is $1 million and has a mortgage of $400,000.
1. Assume Darleen's sister discovered that Darleen had given away a $20 million rental property to a secret lover 5 years ago. Keeping all the same information as the previous question, what is Darleen's new net federal estate tax payable?
a. $8.5 mill
b. $8.1 mill
c. $7.1 mill
d. $8.7 mill
2. Darleen established an irrevocable trust six years ago which she funded with dividend-paying securities worth $3 million. Her former partner, Owen, was the remainder beneficiary of the trust and Darleen was the income beneficiary. Darleen filed IRS Form 709 for the remainder interest gift of $850,000 in the year the gift was made. Darleen died last week when the trust was valued at $3.7 million. Which statement correctly identifies the consequences of this transfer?
a. Darleen cannot use a full unified credit of 4,417,800 on her estate tax return to offset her estate tax because she used a portion of the credit six years ago against the taxable gift.
b. $850,000 is included as an adjusted taxable gift on Darleen's estate tax return.
c. The $3.7 million trust is added to Darleen's gross estate.
d. The tax paid on the remainder interest gift is included in Darleen's gross estate under the gross-up rule.
3. Which of the following items is not an allowable deduction for the sister from Darleen's gross estate?
a. The cost of a grave marker
b. Credit card debt
c. A bequest to charity
d. Executor's commission
4. Why are adjusted taxable gifts added to the taxable estate?
a. To reach the exemption amount of $5,490,000
b. Because the two transfer systems (tax and estate) are unified
c. To apply a partial unified credit to lifetime gifts
d. To decrease the tentative tax base
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started