Following Fact Pattern applies to question 2-5:

Mr. Substantial decided to gift $6,000,000 into an irrevocable trust for his daughter. He paid the gift tax. Mr. Substantial appointed an independent trustee who had discretion to distribute money to Mr. Substantials daughter and her three children. The trust will be distributed after his daughters death to her children.

What is the Generation Skipping Transfer Tax consequence at the daughters death?

A taxable distribution.

A taxable termination.

A direct skip.

No Generation Skipping Transfer Tax because he paid the tax.

What is the Generation Skipping Transfer Tax consequence of distribution income to the daughter?

A taxable distribution

A taxable termination.

Conduit Theory.

No Generation Skipping Transfer Tax because he paid the tax.

What is the Generation Skipping Transfer Tax consequence of a $100,000 distribution to each of the children while his daughter is still alive?

A taxable distribution.

A taxable termination.

A direct skip.

No Generation Skipping Transfer Tax because he paid the tax.

What is the Generation Skipping Transfer Tax consequence if his daughter dies after he sets up the trust and instead he gives the $6,532,000 directly to his daughters children?

The Generation Skipping Transfer Tax is due on $1,000,000. 3 annual exclusions allowed.

No Generation Skipping Transfer Tax is due because they move up one generation at mothers death.

The taxable gift is $1,000,000.

The taxable gift for gift tax purpose is $6,490,000.

Which of the following gifts could cause a generation skipping transfer tax issue for Mrs. Smith age 90?

$200,000 to her grandson, his parents died in an accident.

$200,000 to her grandnephew.

$200,000 to her sisters daughter.

$200,000 to her friend, age 85. (not 37.5 years younger)

Which of the following assets can you not use a special use valuation for?

Real property.

A closely held family business.

A farm.

A residential development.

Which of the following properties cannot be disclaimed by a wife?

Land held joint with rights of survivorship with wife.

Residence held tenancy be the entirety with wife.

$200,000 life insurance policy on husbands life with wife as beneficiary.

Rental property held joint with rights of survivorship with wife.