That is the whole comprehensive case I took pictures as it shows is the order from the case to the question. This is a gift estate planning exercise.

For this exercise, we are instructed to use the 2020 Annual Estate Planning Limits here below. Only use for the year 2020.

COMPRENSIVE CASE Wilma and Fenry Bacicground Wilma and Henry have been married for 50 years and are both in good health. Wilma and Henry live in a community property state. They have the following children and grandchildren: Children Rachel Sarah Heather Tiffany Grandchildren Age 45 3 children Age 35 4 children Age 32 No children Deceased 1 child Rachel, a chef, is married, healthy, and happy. Wilma and Henry adore Rachel's husband, Ross, and their three children. Sarah, a high net worth investment consultant, was recently divorced and her ex-husband, Freddie, has custody of their four children. Wilma and Henry, never quite cared for Freddie, as he always seemed to be quite snooty. Since the divorce, the relationship between Wilma and Freddie has been very strained. Since her divorce, Sarah has had somewhat of a mid- life crisis. She recently rented a penthouse apartment and bought a new Corvette. Sarah has also been dating Luka, a 21-year-old swimsuit model. While Wilma and Henry are confident that this is only a passing phase, they are concerned about giving any gifts to Sarah or her children outright. Heather is a high school teacher who has never been married and has no children. Heather. Heather has aspiralions of going to graduate school to become a principal but is concerned about taking on debt to pursue additional education: Wilma and Henry are considering helping Heather pay for graduate school tuition Tiffany, Wilma and Henry's youngest child, was a bit of a wild child. Tillany died in a tragic accident in her senior year of college while she was on her way home to tell her parents about a big secret she had been keeping. The summer before Tiffany had given birth to a baby girl named Amara. At the time, Tiflariy gave the baby. To the baby's father, an older married man, although no official adoption as ever transacted Wilma and Henry still do not know about Amara. Wilma and Henry own Floppy Days Brewing u popular brewery: Ross Rachel's husband, has worked at the business since lie: was in school Ross is now the manager and handles most of the day-thday fund input from Wilma and Henry Wilma and Henry would like to reward loss for all of his hard work by giving Ross and Rachel 1/2 of the business and giving the remaining 1/2 of Hie luisiness to Saral and leather equally. They do not want Sarah and Heather to have any antrol over the bestness just to have an income interest Rachel's youngest child, Emma was bom with a serious physical disability. To provide additional support for lommn, Henry created an irrevocable arust with Emma as the sole beneficially with a $5,000,000 transfer of separate property in 2018 The trust meets the Requirements of Section 25030) Henry and Wilma made the following additional lifetime transfers: In 2010, Henry gave Rachel, Sarah, and their spouses $234,000 each of community property! In 2014, Henry gave Rachel, Sarah, and their spouses $234,000 each of his separate property. Henry paid gift tax of $117,760 on these gifts. Henry and Wilma paid $152,000 in the years 1993-1996 directly to Baylor University for Rachel to achieve a degree in Religion (assume $38,000 per year). Henry and Wilma paid $70,000 in the years 2001-2004 directly to Texas State University for Sarah to achieve a degree in Finance (assume $17,500 per year). Henry and Wilma paid $37,000 in the years 2004-2007 directly to West Texas A&M University for Heather to achieve a degree in Education (assume $9,250 per year). Henry and Wilma paid $409,500 to Children's Hospital for a lung transplant for Emma in 2017 In 2006, Wilma gave Rachel $117,000 of her separate property as an anniversary gift. In 2014, Wilma gave each of the grandchildren of which she was aware (assume all grandchildren had been born by 2014) $117,000 of her separate property, Wilma and Henry have never elected to split gifts of separate property. Henry and Wilma estimate the following at each of their deaths: The last illness and funeral expenses are expected to be $125,000 per person. Estate administration expenses are estimated at $275,000 per person. Wills Wilma does not have a will. Henry has an outdated will leaving most of his probate assets te Wilma. Clauses from Henry's Statutory Last Will and Testament 1. Henry, being of sound mind and wishing to make proper disposition of my property in the event of my death, do declare this to be my Last Will and Testament. I revoke all of my prior wills and codicils, 1. I have been married but once and only to Wilma with whom I am presently living, Out of my marriage to Wilma, four children were born, namely Rachel, Sarah, Heather, and Tiffany: I have adopted no one nor has anyone adopted me. 2. I leave my Vintage Rolls Royer and House Boat to my daughter, Sarah. 3. I leave the life insurance proceeds on my life to my daughter. Rachel 4. I leave Vacation Home I to my daughter: Tillany. 5. I leave Auto 1 to the Methodist Church, a qualified charity 6. I give the residue of my estate to Wilma, my wife 7. In the event that Wilma predeceases me or fails to survive me for more than six (6) months from the date of my death. I leave any interest of my estate determined to be payable to her to my children, Rachel, Sarah, Heather and Trittany, in equal and 1/4 shares 8. In the event that any of the named legates should predecese medic within six months from the date of my death, disclaim, or otherwise bil to accept any property bequeathed to him or her, then such interest will pass to the said legated's descendents, otherwise his or her share of all of my property of which I dhe possessed shall be paid equally among the survive named Rates 9. I name my best friend Keith to serve as the executor of my succession with full seizin and without bond. 10. I direct that the expenses of my last illness, funeral, and the administration of my estate shall be paid by my executor as soon as practicable after my death and allocated against the residual estate. 11. Since I have made numerous lifetime gifts to my children, all inheritance, estate, succession, transfer, and other taxes (including interest and penalties thereon) payable by reason of my death shall be allocated to the children's share, regardless of whether my spouse survives me. STATEMENT OP PINANCIAL POSITION (HENRY & WILMA) ASSETS Cash/Cash Equivalents CP Cash Total Cash/Cash Equivalents $ 1,462,500 $ 1,462,500 LIABILITIES AND NET WORTH Liabilities Current Liabilities CP Credit Card 1 CP Credit Card 2 Total Current Liabilities $ $ $ 251,840 56,750 308,590 Invested Assets CP Hoppy Days Brewery H Inherited Stock Portfolio H Life Insurance on Henry CP Rental Property W Inherited Stock Portfolio Total Investments $ 14,500,000 $ 3,217,500 $ 1,250,000 $ 855,000 $ 2,740,000 $22,562,500 Long-Term Liabilities CP Mortgage - Primary W Mortgage - Vacation Home 2 H Yacht Total Long-Term Liabilities $ 1,579,500 $ 321,750 $ 1,000,000 $ 2,901,250 Total Liabilities $ 3,209,840 Personal Use Assets CP Primary Residence H Vacation Home 1 W Vacation Home 2 CP Personal Property H Auto 1 W Auto 2 CP Vintage Rolls Royce H Yacht Total Personal Use $ 3,088,000 $ 982,000 $ 788,500 $ 1,250,000 $ 109.980 $ 72,210 $ 250,500 $ 1.755,000 $ 8,296,190 Net Worth $29,111,350 Total Assets $32,321,190 Total Liabilities and Net Worth $32,321,190 67% + Notes to Financial Statements: 1. Assets are stated at fair market value (rounded to even dollars). 2. Liabilities are stated at principal only (rounded to even dollars). 3. The adjusted basis of the primary residence is $1,600,000. 4. Wilma received vacation home 2 from her grandmother, Lois. Wilma and Lois were always very close and Lois gave her the home when Rachel was first born so Wilma could enjoy motherhood as much as Lois had. Lois purchased the vacation home for $15,000 and the FMV of the home at the date of transfer was $280,000. The FMV when Lois died was $350,000. 5. The life insurance policy has Wilma listed as the designated beneficiary. The inherited stock portfolios are Transfer on Death accounts with Rachel, Sarah, and Heather as the listed beneficiaries of both Henry and Wilma's shares. 6. The Yacht was purchased by Henry after his House Boat was destroyed by a Hurricane 7. Property Ownership: CP - Community Property. H - Husband separate. W-Wife separate. 8. Insurance face value (death benefit) and the cash value of $1,000,000 are the same. Answer the following questions. Assume the facts given in the fact pattern and that the 2020 estate and gift tax rates and annual exclusion apply unless otherwise indicated. (Numbers are rounded for convenience.) 1. Which of the following transfer mechanisms would be appropriate for the transfer of Hoppy Days Brewing Salons to Sarah, Rachel, and Heather assuming Wilma and Henry did not want to make an outright gift of the company to them? For full credit, explain for each transfer option below why it is or is not appropriate. 1. Private Annuity 2. SCIN 3. Family Limited Partnership 4. OPRT 2. If Henry died today, which of the following statements is true regarding the transfers made in his will? For full credit, explain why each statement is true or false. (a) Wilma will receive Henry's interest in the inherited stock portfolio (b) Rachel will receive the proceeds of the life insurance policy, (c) Tiffany will receive the yacht in place of the house boat. (d) Amara may potentially receive Vacation Home 1 as Tiffany's rightful heir. 3. Assuming Henry died today, calculate his gross estate. 4. Assuming Henry died today, calculate his probate estate. 5. Ignoring the above data, assume that Henry died today and the estate tax due was $14,690,129 and Keith is appointed executor. Unfortunately, Keith forgot to file an Estate Tax Return (Form 706) and pay the estate tax due until 286 days after the return's due date. How much is the failure-to-file penalty? 6. Identify and value each taxable gift made by Henry during his life. Where appropriate, explain any exemptions or exclusions that applied. 7. Calculate Henry's gift tax due in each year he made a taxable gift. Show your work. Even if the tax due is zero, show your calculation in each year there is a taxable gift. 8. Identity and value cach taxable gift made by Wilma during her life. Where appropriate explain any exemptions or exclusions that applied 9. Calculate Wilma's gilt tax due in each year she made a taxable gitt Show your work. Even if the tax due is zero, show your calculation in each year there is a taxable gift. al o 2021 Annual Estate Planning Limits Estate Planning 2018 2019 2020 2021 Annual Gift Tax Exclusion $15,000 $15,000 $15,000 $15,000 Annual Gift Tax Exclusion to a $152,000 $155,000 Noncitizen Spouse $157,000 $159,000 Applicable Exclusion Amount: Gift Tax $11,180,000 $11,400,000 $11,580,000 $11,700,000 Estate Tax $11,180,000 $11,400,000 $11,580,000 $11,700,000 Applicable Credit Amount: Gift Tax Credit Equivalent $4,417,800 $4,505,800 $4,577,800 $4,625,800 Estate Tax Credit Equivalent $4,417,800 $4,505,800 $4,577,800 $4,625,800 40% Maximum Estate and Gift Tax Rate 40% 40% 40% GSTT Exclusion Amount $11,180,000 $11,400,000 $11,580,000 $11,700,000 $1,590,000 Estate Installments (Section 6166) $1,520,000 $1,550,000 $1,570,000 $1,190,000 $1,140,000 $1,160,000 $1,180,000 pecial Use Valuation (Section 2032A) Sahedule for states and Trusts (2021) COMPRENSIVE CASE Wilma and Fenry Bacicground Wilma and Henry have been married for 50 years and are both in good health. Wilma and Henry live in a community property state. They have the following children and grandchildren: Children Rachel Sarah Heather Tiffany Grandchildren Age 45 3 children Age 35 4 children Age 32 No children Deceased 1 child Rachel, a chef, is married, healthy, and happy. Wilma and Henry adore Rachel's husband, Ross, and their three children. Sarah, a high net worth investment consultant, was recently divorced and her ex-husband, Freddie, has custody of their four children. Wilma and Henry, never quite cared for Freddie, as he always seemed to be quite snooty. Since the divorce, the relationship between Wilma and Freddie has been very strained. Since her divorce, Sarah has had somewhat of a mid- life crisis. She recently rented a penthouse apartment and bought a new Corvette. Sarah has also been dating Luka, a 21-year-old swimsuit model. While Wilma and Henry are confident that this is only a passing phase, they are concerned about giving any gifts to Sarah or her children outright. Heather is a high school teacher who has never been married and has no children. Heather. Heather has aspiralions of going to graduate school to become a principal but is concerned about taking on debt to pursue additional education: Wilma and Henry are considering helping Heather pay for graduate school tuition Tiffany, Wilma and Henry's youngest child, was a bit of a wild child. Tillany died in a tragic accident in her senior year of college while she was on her way home to tell her parents about a big secret she had been keeping. The summer before Tiffany had given birth to a baby girl named Amara. At the time, Tiflariy gave the baby. To the baby's father, an older married man, although no official adoption as ever transacted Wilma and Henry still do not know about Amara. Wilma and Henry own Floppy Days Brewing u popular brewery: Ross Rachel's husband, has worked at the business since lie: was in school Ross is now the manager and handles most of the day-thday fund input from Wilma and Henry Wilma and Henry would like to reward loss for all of his hard work by giving Ross and Rachel 1/2 of the business and giving the remaining 1/2 of Hie luisiness to Saral and leather equally. They do not want Sarah and Heather to have any antrol over the bestness just to have an income interest Rachel's youngest child, Emma was bom with a serious physical disability. To provide additional support for lommn, Henry created an irrevocable arust with Emma as the sole beneficially with a $5,000,000 transfer of separate property in 2018 The trust meets the Requirements of Section 25030) Henry and Wilma made the following additional lifetime transfers: In 2010, Henry gave Rachel, Sarah, and their spouses $234,000 each of community property! In 2014, Henry gave Rachel, Sarah, and their spouses $234,000 each of his separate property. Henry paid gift tax of $117,760 on these gifts. Henry and Wilma paid $152,000 in the years 1993-1996 directly to Baylor University for Rachel to achieve a degree in Religion (assume $38,000 per year). Henry and Wilma paid $70,000 in the years 2001-2004 directly to Texas State University for Sarah to achieve a degree in Finance (assume $17,500 per year). Henry and Wilma paid $37,000 in the years 2004-2007 directly to West Texas A&M University for Heather to achieve a degree in Education (assume $9,250 per year). Henry and Wilma paid $409,500 to Children's Hospital for a lung transplant for Emma in 2017 In 2006, Wilma gave Rachel $117,000 of her separate property as an anniversary gift. In 2014, Wilma gave each of the grandchildren of which she was aware (assume all grandchildren had been born by 2014) $117,000 of her separate property, Wilma and Henry have never elected to split gifts of separate property. Henry and Wilma estimate the following at each of their deaths: The last illness and funeral expenses are expected to be $125,000 per person. Estate administration expenses are estimated at $275,000 per person. Wills Wilma does not have a will. Henry has an outdated will leaving most of his probate assets te Wilma. Clauses from Henry's Statutory Last Will and Testament 1. Henry, being of sound mind and wishing to make proper disposition of my property in the event of my death, do declare this to be my Last Will and Testament. I revoke all of my prior wills and codicils, 1. I have been married but once and only to Wilma with whom I am presently living, Out of my marriage to Wilma, four children were born, namely Rachel, Sarah, Heather, and Tiffany: I have adopted no one nor has anyone adopted me. 2. I leave my Vintage Rolls Royer and House Boat to my daughter, Sarah. 3. I leave the life insurance proceeds on my life to my daughter. Rachel 4. I leave Vacation Home I to my daughter: Tillany. 5. I leave Auto 1 to the Methodist Church, a qualified charity 6. I give the residue of my estate to Wilma, my wife 7. In the event that Wilma predeceases me or fails to survive me for more than six (6) months from the date of my death. I leave any interest of my estate determined to be payable to her to my children, Rachel, Sarah, Heather and Trittany, in equal and 1/4 shares 8. In the event that any of the named legates should predecese medic within six months from the date of my death, disclaim, or otherwise bil to accept any property bequeathed to him or her, then such interest will pass to the said legated's descendents, otherwise his or her share of all of my property of which I dhe possessed shall be paid equally among the survive named Rates 9. I name my best friend Keith to serve as the executor of my succession with full seizin and without bond. 10. I direct that the expenses of my last illness, funeral, and the administration of my estate shall be paid by my executor as soon as practicable after my death and allocated against the residual estate. 11. Since I have made numerous lifetime gifts to my children, all inheritance, estate, succession, transfer, and other taxes (including interest and penalties thereon) payable by reason of my death shall be allocated to the children's share, regardless of whether my spouse survives me. STATEMENT OP PINANCIAL POSITION (HENRY & WILMA) ASSETS Cash/Cash Equivalents CP Cash Total Cash/Cash Equivalents $ 1,462,500 $ 1,462,500 LIABILITIES AND NET WORTH Liabilities Current Liabilities CP Credit Card 1 CP Credit Card 2 Total Current Liabilities $ $ $ 251,840 56,750 308,590 Invested Assets CP Hoppy Days Brewery H Inherited Stock Portfolio H Life Insurance on Henry CP Rental Property W Inherited Stock Portfolio Total Investments $ 14,500,000 $ 3,217,500 $ 1,250,000 $ 855,000 $ 2,740,000 $22,562,500 Long-Term Liabilities CP Mortgage - Primary W Mortgage - Vacation Home 2 H Yacht Total Long-Term Liabilities $ 1,579,500 $ 321,750 $ 1,000,000 $ 2,901,250 Total Liabilities $ 3,209,840 Personal Use Assets CP Primary Residence H Vacation Home 1 W Vacation Home 2 CP Personal Property H Auto 1 W Auto 2 CP Vintage Rolls Royce H Yacht Total Personal Use $ 3,088,000 $ 982,000 $ 788,500 $ 1,250,000 $ 109.980 $ 72,210 $ 250,500 $ 1.755,000 $ 8,296,190 Net Worth $29,111,350 Total Assets $32,321,190 Total Liabilities and Net Worth $32,321,190 67% + Notes to Financial Statements: 1. Assets are stated at fair market value (rounded to even dollars). 2. Liabilities are stated at principal only (rounded to even dollars). 3. The adjusted basis of the primary residence is $1,600,000. 4. Wilma received vacation home 2 from her grandmother, Lois. Wilma and Lois were always very close and Lois gave her the home when Rachel was first born so Wilma could enjoy motherhood as much as Lois had. Lois purchased the vacation home for $15,000 and the FMV of the home at the date of transfer was $280,000. The FMV when Lois died was $350,000. 5. The life insurance policy has Wilma listed as the designated beneficiary. The inherited stock portfolios are Transfer on Death accounts with Rachel, Sarah, and Heather as the listed beneficiaries of both Henry and Wilma's shares. 6. The Yacht was purchased by Henry after his House Boat was destroyed by a Hurricane 7. Property Ownership: CP - Community Property. H - Husband separate. W-Wife separate. 8. Insurance face value (death benefit) and the cash value of $1,000,000 are the same. Answer the following questions. Assume the facts given in the fact pattern and that the 2020 estate and gift tax rates and annual exclusion apply unless otherwise indicated. (Numbers are rounded for convenience.) 1. Which of the following transfer mechanisms would be appropriate for the transfer of Hoppy Days Brewing Salons to Sarah, Rachel, and Heather assuming Wilma and Henry did not want to make an outright gift of the company to them? For full credit, explain for each transfer option below why it is or is not appropriate. 1. Private Annuity 2. SCIN 3. Family Limited Partnership 4. OPRT 2. If Henry died today, which of the following statements is true regarding the transfers made in his will? For full credit, explain why each statement is true or false. (a) Wilma will receive Henry's interest in the inherited stock portfolio (b) Rachel will receive the proceeds of the life insurance policy, (c) Tiffany will receive the yacht in place of the house boat. (d) Amara may potentially receive Vacation Home 1 as Tiffany's rightful heir. 3. Assuming Henry died today, calculate his gross estate. 4. Assuming Henry died today, calculate his probate estate. 5. Ignoring the above data, assume that Henry died today and the estate tax due was $14,690,129 and Keith is appointed executor. Unfortunately, Keith forgot to file an Estate Tax Return (Form 706) and pay the estate tax due until 286 days after the return's due date. How much is the failure-to-file penalty? 6. Identify and value each taxable gift made by Henry during his life. Where appropriate, explain any exemptions or exclusions that applied. 7. Calculate Henry's gift tax due in each year he made a taxable gift. Show your work. Even if the tax due is zero, show your calculation in each year there is a taxable gift. 8. Identity and value cach taxable gift made by Wilma during her life. Where appropriate explain any exemptions or exclusions that applied 9. Calculate Wilma's gilt tax due in each year she made a taxable gitt Show your work. Even if the tax due is zero, show your calculation in each year there is a taxable gift. al o 2021 Annual Estate Planning Limits Estate Planning 2018 2019 2020 2021 Annual Gift Tax Exclusion $15,000 $15,000 $15,000 $15,000 Annual Gift Tax Exclusion to a $152,000 $155,000 Noncitizen Spouse $157,000 $159,000 Applicable Exclusion Amount: Gift Tax $11,180,000 $11,400,000 $11,580,000 $11,700,000 Estate Tax $11,180,000 $11,400,000 $11,580,000 $11,700,000 Applicable Credit Amount: Gift Tax Credit Equivalent $4,417,800 $4,505,800 $4,577,800 $4,625,800 Estate Tax Credit Equivalent $4,417,800 $4,505,800 $4,577,800 $4,625,800 40% Maximum Estate and Gift Tax Rate 40% 40% 40% GSTT Exclusion Amount $11,180,000 $11,400,000 $11,580,000 $11,700,000 $1,590,000 Estate Installments (Section 6166) $1,520,000 $1,550,000 $1,570,000 $1,190,000 $1,140,000 $1,160,000 $1,180,000 pecial Use Valuation (Section 2032A) Sahedule for states and Trusts (2021)