Harvey€™s last will and testament provides for bequests to his spouse, daughter and grandson. Upon his death, his wife is to receive $200,000 in cash. In addition, $800,000 of specific assets are to be held in trust on her behalf. This trust is required to pay his wife, during her lifetime, all of the annual income generated by the trust. Upon the death of his wife, the trust€™s assets will be distributed equally to his daughter and grandson. The remaining assets in Harvey€™s estate are to be divided into separate trusts for each of his daughter and grandson. Harvey has indicated that a particular real estate investment be shared 50% by the trust for his wife and 25% for each of the other trusts.
The trust for his daughter will require all income to be distributed annually until she reaches the age of 40 at which time the assets will be distributed to her. The trust for the grandchild will hold all of its income in trust until he reaches the age of 25. Thereafter, the grandson will receive the annual income and upon reaching the age of 40 will receive all of the assets owned by the trust.
Harvey died in 20X9 when his daughter was 35 years old and his grandson was 15. The following assets are transferred to the trusts.

The land and building represents a single rental property that generates net cash rental income of $300,000. The property was purchased in 20X1 for $800,000 (land $150,000; building $650,000). The UCC of the building at the time of death was $500,000. Future rental income will be shared 50% by the trust for Harvey€™s wife and 25% for each of the other two trusts. The bonds earn interest at the rate of 6% and the stocks generate dividends of 3%.The stock portfolio has a cost base of $600,000. Harvey€™s spouse will have earned income of $30,000 from sources other than the trust. His daughter earns an annual salary of $100,000 and his grandson has no income.
Required:
1. What are the tax consequences to Harvey at the time of death relating to the assets described above?
2. What are the cost amounts for tax purposes of the assets received by each of the trusts?
3. Develop a plan for each trust for managing the trust income that will minimize the overall tax for the beneficiaries and the trusts. Show calculations where appropriate.
4. What are the tax consequences that will result when the trust assets are distributed to the beneficiaries? Assume the trust will own the same assets throughout.

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Property Market Value) Wife Daughter Grandson Land $100,000 50,000 S50,000 Building Bonds Stocks (public corporations) 400,000 200,000 200,000 100,000 300,000 300,000 200.000 200,000 200.000 $800,000 $750,000