Grantor G created an irrevocable trust funded w/$500K. G is 70, A is 60 and C is 30, IRC 7520 rate is 2%. A & C are not related to G.

a. Income payable to A for life (reversion to G).

b. G retained life estate, remainder to A.

c. G retained income for 15 years, then to A. G dies 4 years later.

d. G retained income for 15 years, then to A. G dies 16 years later.

For each of the above scenarios answer the following questions:

1. Was there a taxable gift and, if yes, what is the amount of the taxable gift?

2. When G dies is anything included in his estate?

Make sure that when you calculate the term of years that there is a contingency that he might not survive the term of years and the gift has to be adjusted for this contingency. The contingency is calculated by using the Table 2000CM Mortality rates by dividing the value at age 85 by value at age 70. See problems on pages 377-378 (Problem 12-20 has an error in the last line it should be 2,500,000 and not 1,800,000).

Problem 2: When Adam was 70 years old, he established a QPRT for a term of 10 years with his children as remaindermen. At the date of gift the value of the home was $1,500,000. The IRC rate was 2%.

What was the amount of taxable gift?