Name Relationship Age Occupation Health Comments

Louie Husband $78$ Retired Terminally Ill

Kathleen Wife $75$ Retired Excellent

Jerry Son $50$ CEO, Borellis Casinos Excellent

Sal Son $47$ Casino Floor Manager Excellent Married, one child

Emily Granddaughter $($Sal$\text{'}$s Child$)22$ Just graduated from college Excellent Getting married this summer

Ava Non$-$marital child $($Louie$\text{'}$s child with another woman$)20$ Cocktail waitress Excellent Relies on Louie for support

GOALS AND OBJECTIVES

$1.$ Louie and Kathleen want to ensure the efficient transfer of their estate to their heirs.

$2.$ Louie wants to make sure that Ava is not disinherited at his death.

$3.$ Louie and Kathleen would like to give $$20,000$ in cash to Emily to help fund her wedding.

$4.$ Louie and Kathleen would like to give their shares in XYZ Company to their neighbor whose child was recently killed in a car accident.

$5.$ Louie and Kathleen would like to continue to support the nonprofit research organization that is looking for a cure for Louie$$s disease, while maximizing their income tax deduction. They have set aside $$175,000$ in a savings account for this purpose.

INCOME TAX INFORMATION

Louie and Kathleen had an adjusted gross income of $$185,000$ last year and anticipate it will be the same this year. They made a $$100,000$ cash charitable contribution this year to the nonprofit research organization trying to find a cure to Louie$$s disease. They are in the $28\%$ marginal federal tax bracket for the current year.

ESTATE PLANNING INFORMATION

Louie and Kathleen live in a community$-$property state. Louie and Kathleen$$s current wills leave all their assets to each other at their deaths. Jerry is the named executor in both wills. After Louie was diagnosed as terminally ill, he and Kathleen met with their attorney to discuss drafting new estate planning documents. The attorney has proposed that Louie execute a will in which his entire estate will pass to a testamentary marital trust with a QTIP election. The income from the trust would be paid annually to Kathleen, but she would be restricted to withdrawing principal only for her health, maintenance, and support.

At Kathleen$$s death, the assets would pass equally to Jerry, Sal, and Ava, per stirpes. The terms of the trust do not give Kathleen the right to change the beneficiaries, but she can direct a different allocation of assets among the beneficiaries at her death.

The attorney has also recommended that while Louie is still in good mental condition, he and Kathleen both execute advance medical directives and powers of attorney for property and health care. Louie would like to have sole responsibility to take care of his finances and medical decisions until he is incapacitated. Louie wanted to make things as easy as possible at his death for Kathleen and Jerry so he prepaid his funeral expenses.Louie and Kathleen Borelli

Statement of Financial Position as of December $31$st Last Year

ASSETS

Cash and Cash Equivalents

Checking account $ $75,000$

Savings account $ $175,000$

TOTAL Cash and Cash Equivalents $ $250,000$

Invested Assets

Borelli Casinos company stock$1$ $ $20,000,000$

XYZ Company stock$2$ $ $25,000$

Louie's IRA$3$ $ $1,100,000$

Brokerage account $ $2,300,000$

Annuity$5$ $ $800,000$

TOTAL Invested Assets $$24,225,000$

Personal Use Assets

Nevada ranch$6$ $ $1,400,000$

Cars $ $75,000$

Furniture and household items $ $250,000$

TOTAL Personal Use Assets $ $1,725,000$

Total Assets $$26,200,000$

LIABILITIES AND NET WORTH

Liabilities $($none$)$ $ $0$

TOTAL Liabilities $ $0$

Net Worth $$26,200,000$

All assets are considered community property unless otherwise noted.

$1$ The basis in the stock is $$1,230,000.$ This amount represents $20\%$ of all outstanding shares.

$2$ XYZ is a publicly traded company. The basis in the stock is $$56,000.$

$3$ Kathleen is the named primary beneficiary. Jerry and Sal are the named contingent beneficiaries.

$4$ The basis in the brokerage account is $$1,900,000.$

$5$ See the Annuity Information section for details.

$6$ The land is worth $$300,000.$ The basis in the property is $$440,000.$ The mortgage is paid off.

Question

If Louie died this year, what would be the basis for assets in the brokerage account after his death?

$$1,150,000$

$$1,900,000$

$$2,100,000$

$$2,300,000$