In May 2008, Jasper Mason died, survived by his spouse Amber Mason and four adult children. His
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In May 2008, Jasper Mason died, survived by his spouse Amber Mason and four adult children. His gross estate was valued at $3 million, and he had Sec. 2053 deductions of $120,000. His will left the personal residence on which the mortgage had been paid off to Amber. Its value was $450,000. The will stated that the rest of Jasper’s property was to pass to a trust at Seaman’s Bank with Amber to receive all the trust income semi-annually for life and the four children to receive the remainder in equal shares. Amber was the beneficiary of a $1 million life insurance policy included in Jasper’s gross estate. The insurance policy was the only non-probate asset. Jasper made no post-1976 taxable gifts. A CPA with a small firm that does not specialize in taxation prepared the estate tax return for Jasper’s estate and elected to claim the marital deduction for the trust. The firm with whom you are employed has been engaged to prepare the estate tax return for Amber, who died in May 2015. The Seaman’s Bank trust has increased in value to $3 million as of Amber’s date of death. Amber owned assets valued at $4 million in her own name. Your manager asks you to research whether the Seaman’s Bank trust has to be included in Amber’s gross estate. He is hoping that it does not because, even if the marital deduction had not been claimed for the trust, Jasper’s estate still would not have owed any tax. Draft a memo to your manager reporting the results of your research. Confine your research to IRS pronouncements.
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