Question
The year is 2021 and Tim, age 59, and Rhonda, age 30, have been dating for about a year and a half. Tim and Rhonda
The year is 2021 and Tim, age 59, and Rhonda, age 30, have been dating for about a year and a half. Tim and Rhonda met when Tim was in New York at the Plumbers and Pipefitters Union convention. Tim is an art collector and Rhonda, a beautiful artist, was selling paintings at the market by Tims hotel. After a month-long romance, Tim asked Rhonda to return to Missouri with him.
While they have no current plans to marry, they recently found out that Rhonda is expecting her first child. When they found out Rhonda was pregnant, Rhonda moved into Tims house so they could prepare for the baby, whom they plan to name Sawyer. To prove to Rhonda that he was serious about them being a family, this year Tim gave Rhonda $12,000,000 in a money market account and transferred ownership of 4the house to her (FMV $3,250,000 and basis of $1,750,000). Tim also purchased a $2,000,000 life insurance policy on his life and named Rhonda as the beneficiary. Premiums are $18,000 per year.
Tim was previously married and has three children from that marriage, Sarah, age 34, Wesley, age 31, and Susan, age 28. Both girls are happily married and have children of their own. Sarah has two children, Emily, age 6, and Melissa, age 12. Susan has twins, Brett and Melanie, age 2. Wesley is single and has no children.
Tim and his first wife, Deanna, have been divorced for six years and are not on speaking terms. After their divorce, Tim was required to pay Deanna alimony in the amount of $10,000 per month. When the court order expired at the end of last year, Tim felt bad so he continues to give Deanna $6,000 per month on the first of each month, totaling $60,000 this year.
Tim also made the following gifts during the current year:
- $42,000 cash to each grandchild
- $18,000 directly to Melissas private school to pay her tuition
- $67,000 to Susan to help her pay for the twins most recent hospitalization
- $72,000 to the Springfield Art Museum
- An original Chihuly glass sculpture to Wesley. The FMV on the date of the gift was $160,000. Tims basis was $164,000 and he purchased the sculpture three months ago. Tim paid $29,000 in gift tax for this gift.
1. What is the amount of Tims total taxable gifts for the year? (show your work in this chart, including totals for each column) 3 points*
Donee | Gift | Less Exempt Transfer | Less Annual Exclusion | Total Taxable Gifts |
Rhonda |
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Deanna |
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Wesley |
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Susan |
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Melissa |
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Emily |
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Brett |
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Melanie |
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Art Museum |
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Total |
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