Question
Using the background below and California tax jurisdiction, please answer the following questions: If Logan were to die December 31, 2018, what would his taxable
Using the background below and California tax jurisdiction, please answer the following questions:
- If Logan were to die December 31, 2018, what would his taxable estate be?
- If Logan were to die December 31, 2018, what would his tentative estate tax be?
- If Logan were to die December 31, 2018, what would his federal estate tax liability be?
LOGAN AND VERONICA BACKGROUND
Logan, age 42, and Veronica, age 33, have been married for about two years. Logan and Veronica met when
Logan was on a vacation in Vancouver. Veronica is a beautiful Canadian actress who was employed full-time
by the Hallmark network making made-for-television movies when she met Logan. After a month-long
romance, Logan asked Veronica to return to the United States with him. Although not a United States citizen,
she has maintained residence in the United States for 15 months.
Logan and Veronica recently found out that Veronica is expecting their first child together. When they found
out Veronica was pregnant, Veronica and Logan moved into the 4 bedroom home that Logan owns as
separate property so they could prepare for the baby, whom they plan to name Lily. To prove to Veronica that
he was serious about them being a family, Logan gave Veronica $2,015,000 in a money market account in
January 2018. Logan also purchased a $5,000,000 life insurance policy on his life and named Veronica as
the beneficiary.
Logan was previously married and has three sons from that marriage, Duncan, age 24, Cassidy, age 22, and
Wallace, age 12. All three children are happy and healthy.Duncan is happily married to Meg and has two
small children of his own. Cassidy is a single college student who is pursuing a degree in film production at
USC.Wallace is a seventh grader at Walter Reed Middle School in Los Angeles.
Logan and his first wife, Bonnie, have been divorced for eleven years and have a strained relationship. After
their divorce, Logan was required to pay Bonnie alimony in the amount of $10,000 per month. When the court
order expired at the end of 2016, Logan felt guilty about the dissolution of the marriage so he continues to
give Bonnie $15,000 per month on the first of each month.
Although Logan has had a few skin cancer spots removed stemming from his years of sun exposure, he is
otherwise healthy. Veronica has never been married before her marriage to Logan.
She is in excellent health, and learned just a few days ago that they are having a baby girl, who is expected
to be healthy. Logan is an active businessman and owns The Neptune Grand, a local luxury hotel, while
Veronica is currently taking a break from acting. Logan and Veronica live in a community property state.
Logan's mother, Lynn, also lives with Veronica and him. Lynn is 68 and in failing health. She was recently
diagnosed with ALS (also known as Lou Gehrig's disease). While she is unable to feed or bathe herself, she
is expected to live for several more years. Lynn has already spent all of her retirement assets and relies
exclusively on Social Security. The only substantial asset she owns is a life insurance policy covering her life.
The policy has a $100,000 death benefit. The policy does not have a named beneficiary.
For estate planning purposes, Logan estimates the following expenses at his death:
1. The last illness expenses are expected to be $100,000.
2. Estate administration expenses are estimated at $180,000.
3. Funeral expenses are expected to be $120,000.
GIFTS TO CHILDREN in 2016
Logan made the following gifts to his children during 2016:
Logan gave $150,000 of separate property to Duncan.
Logan paid $58,000 to USC for Cassidy's film school tuition.
Logan gave Cassidy a Land Rover valued at $68,500 to celebrate his success in film school
to date.
GIFTS TO GRANDCHILDREN in 2017
Logan made the following gifts to his grandchildren during 2017:
Seeing how Logan's mom outlived her assets, Logan is afraid his grandchildren may have the
same fate. To assist them with their retirement income, Logan decided to establish a trust for the
grandchildren. The trust is an irrevocable trust and he funded it in the current year with $800,000.
The trust will accumulate income until each grandchild reaches age 50. When a grandchild
reaches age 50, he/she will begin receiving an annuity for their life. When all of the grandchildren
die, if there is any remaining assets then the trustee may distribute those assets to a charitable
organization of his choosing.
Logan sent a check in the amount of $16,000 directly to Casa Montessori preschool to pay tuition
for the grandkids.
Logan also gave each grandchild $15,000.
Assume Logan paid gift tax of $2,300,000 in 2016 for taxable gifts in the amount of $11,180,000 made
in 2015. These were his first taxable gifts.
LOGAN'S STATEMENT OF FINANCIAL POSITION (AFTER THE GIFT TO VERONICA)
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