Use the following scenario to answer questions 10 through 13.

Mark died on January 1, 2018 after a drunk driver hit his car. The property that he owned at the time of his death included the following:

	FMV on	FMV on	FMV on	FMV on	FMV on
Property	Basis 1/1/18	4/1/18	7/1/18	10/1/18	1/1/19
House	$500,000 $850,000	$858,555	$862,842	$863,888	$865,900
Boat	$60,000 $55,000	$52,527	$52,060	$48,599	$46,143
Annuity	$100,000 $300,000	$275,840	$251,193	$226,050	$200,401
Note Receivable	$60,000 $300,000	$290,918	$281,744	$272,479	$263,121
Personal Property	$200,000 $60,000	$58,627	$58,258	$58,894	$58,534
Car	$67,500 $37,500	$34,689	$34,381	$34,078	$23,778
Rental Property	$650,000 $800,000	$821,101	$832,810	$837,732	$848,788
Investment Account	$1,250,000 $1,850,000 $2,887,500 $4,252,500	$1,150,555 $3,542,812	$1,128,222	$1,145,865	$1,543,468
Total			$3,501,510	$3,487,585	$3,850,133

All property listed above was owned in sole ownership by Mark. The annuity is a joint and survivor annuity and will continue to pay his wife Mindy for her lifetime. Marks will leaves all probate assets to his son and daughter in equal shares. Mark also owned a life insurance policy on his life. His basis in the policy was $95,000 and the death benefit was $1,000,000. The beneficiary of the insurance policy was Marks daughter, Daphne. Marks investment account had a transfer on death designation to Daphne. The family sued the drunk driver and received $1,000,000 for wrongful death payable to Mindy and $500,000 for Marks pain and suffering payable to Marks estate. Mark made substantial gifts during his life. He paid gift tax of $98,000 in 2006, $67,200 2014, and $115,250 on April 15, 2016. Marks funeral cost $15,000. The car was sold 4/1/18 for its fair market value on that date in order to pay for Marks $28,000 hand-carved marble headstone. Mark had $350,000 of medical expenses from the accident, but all expenses were covered by his medical insurance. The note receivable was being paid monthly.

What is the value of Marks gross estate assuming the date of death valuation is selected?

What is the value of Marks gross estate assuming the alternate valuation date is selected?

Determine whether each of the following items is included in Marks probate estate? Explain.

Annuity

Note Receivable

Gift Tax Paid in 2014

Gift Tax Paid in 2016

Investment Account

What is the value of Marks probate estate?

Barbara contributed $1,250,000 to a revocable living trust in 2007. She named herself as the income beneficiary and her only daughter as the remainder beneficiary. The term of the trust was equal to Barbaras life expectancy. Barbara died in 2017, when the fair market value of the trusts assets is $2,750,000. How much is included in Barbaras probate estate related to the revocable living trust? Why?

Farrah contributed $750,000 to an irrevocable trust with no retained powers in 2016 and did not retain any powers over the transferred assets. She named her only daughter as the sole income and remainder beneficiary and paid gift tax at the date of the transfer of $248,300. In 2018, Farrah died of breast cancer. The fair market value of the property in the irrevocable trust was $5,000,000 at the date of her death. What is the value of assets that are included in Chelseas gross estate? Why?

Steve sold his farm to the American Civil Liberties Union. The farm had a fair market value of $750,000. Steve inherited the farm from his brother three years prior to the sale when the fair market value of the home was $400,000. Steves brother had an adjusted basis in the farm home equal to $250,000. The full sales price paid by the American Civil Liberties Union to Steve was $75,000. What amount of capital gain/loss would Steve report on his tax return for the year related to this sale?

Jimbo made the following transfers during the year:

100 shares of Walmart stock to the American Heart Association. At the date of the contribution, the stock had a fair market value of $96.50 per share. Jimbos adjusted taxable basis in the stock was $10 per share and he held the stock long term.

$25,000 to Texas A&M University. The $25,000 contribution allows him to purchase football season tickets. Jimbo also bought the football season tickets at a cost of $10,000.

$1,000 to St. Judes Childrens Hospital during a local radio broadcast during the annual fund drive. In return for the $1,000 contribution, Jimbo received a St. Judes Childrens Hospital calendar with the radio stations logo valued at $15.

Ignoring any AGI limitations, what is Jimbos maximum charitable income tax deduction for this year?

Sonny and Cher have been married for 35 years. Sonny had a net worth of $10,000,000 when he died in 2015. Which of the following scenarios would incur the lowest overall (at Sonnys death and Chers death) estate taxes assuming the property transfers at equal value at the death of both individuals and utilizing 2015 estate tax rates? Assume that portability is

not elected. For full credit, show your calculations for each scenario and justify your answer.

Sonnys will directs the transfer of $3,000,000 to his two children and the remainder of his assets to his wife, Cher.

Sonnys will directs that all of his property is transferred to Cher.

At Sonnys death, specific bequests totaling $1,000,000 are transferred per the direction of the will to individuals other than Cher. The remainder of the assets are transferred to a trust with the income payable to Cher for her life and the remainder interest payable to the children at Chers death. Sonnys executor elected to treat this as a QTIP trust.

In his will, Sonny funds a trust with $5,430,000 for the benefit of his two children. Cher will receive an annual income distribution from the trust. All other assets will transfer to Cher.

Elsa has been married to Chris for 15 years. Chris is an Australian citizen. Elsa would like to make an inter vivos transfer to Chris. What is the maximum amount that Amanda can transfer to Javier without incurring transfer taxes or utilizing any of her applicable credit during 2018?

Holly died in 2018. She had been married to Wyatt for 28 years, and the two had amassed a community property estate of $25,000,000. Hollys will directs three specific bequests to her mother, brother, and father of $2,000,000, $500,000, and $1,000,000, respectively and creates a bypass trust to receive property equal to any remaining applicable estate tax credit available after her specific bequests. The bypass trust gives Wyatt the right to income for his life and the remainder of the trust to her two sons and leaves the residue of the estate to Wyatt. Hollys will directs the residue to be used to pay the estate taxes. What is the marital deduction on Hollys federal estate tax return?

PROJECT #2 Reference Pages

APPLICABLE GIFT AND ESTATE TAX CREDITS AND EXCLUSION AMOUNTS Pplicabie Estate Tax Estate Tax Credit Year of Death Applicable Gift Applicable Gift Tax Credit Equivalency Equivalency 1997 $192,800 $600,000 $625,000 $650,000 $675,000 $600,000 $625,000 $650,000 $675,000 $675,000 $345,800 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $192,800 $202,050 $211,300 $220,550 $220,550 1999 2000 $211,300 $220,550 $220,550 2002 2003 2004 2005 2006 2008 $345,800 $1,000,000 $345,800$1,000,000 $1,500,000 $1,500,000 $2,000,000 $345,800 $345,800 $345,800 $345,800 $345,800 $330,800 $1,730,800 $555,800 $555,800 $780,800 $1,455,800 2010 REPEALED $5,000,000 $1,772,800 $5,120,000 $5,250,000 $5,340,000 $5,430,000 $2,125,800 $5,450,000 $%2,125,800 $5,450,000 $2,141,800 $490,000 $2,141,800 $5,490,000 $4.417,800 $11,180,000 $1,730,800 $1,772,800 $2,045,800 $2.081.800 $2,117,800 $5,000,000 $5,120,000 $5,250,000 $5.340,000 2012 2013 2014 $2,045,800 $2.081,800 5,430,000 $2,117,800 2016 2017 2018 $4,417,800 S11,180,000 TRA 2010 permits estare represcntatives to opt ont of the TRA 200 regime. APPLICABLE GIFT AND ESTATE TAX CREDITS AND EXCLUSION AMOUNTS Pplicabie Estate Tax Estate Tax Credit Year of Death Applicable Gift Applicable Gift Tax Credit Equivalency Equivalency 1997 $192,800 $600,000 $625,000 $650,000 $675,000 $600,000 $625,000 $650,000 $675,000 $675,000 $345,800 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $192,800 $202,050 $211,300 $220,550 $220,550 1999 2000 $211,300 $220,550 $220,550 2002 2003 2004 2005 2006 2008 $345,800 $1,000,000 $345,800$1,000,000 $1,500,000 $1,500,000 $2,000,000 $345,800 $345,800 $345,800 $345,800 $345,800 $330,800 $1,730,800 $555,800 $555,800 $780,800 $1,455,800 2010 REPEALED $5,000,000 $1,772,800 $5,120,000 $5,250,000 $5,340,000 $5,430,000 $2,125,800 $5,450,000 $%2,125,800 $5,450,000 $2,141,800 $490,000 $2,141,800 $5,490,000 $4.417,800 $11,180,000 $1,730,800 $1,772,800 $2,045,800 $2.081.800 $2,117,800 $5,000,000 $5,120,000 $5,250,000 $5.340,000 2012 2013 2014 $2,045,800 $2.081,800 5,430,000 $2,117,800 2016 2017 2018 $4,417,800 S11,180,000 TRA 2010 permits estare represcntatives to opt ont of the TRA 200 regime