If someone could answer this quickly! These are questions involving gift and estate tax.

(4) Insured owned 60% of the voting stock of Corporation, which owned a policy on Insured’s life. The minority 40% shareholder was beneficiary of the policy, but Corporation held the incidents of ownership in the policy.

(a) To what extent are the proceeds of the policy included in Insured’s gross estate at Insured’s death?

Answer: Policy Owned by Controlled Corporation: 100% of proceeds included in D’s estate. If D has ownership of more than 50% of the corporation, then the corporation’s incidents of ownership will be attributed to D.

Exception: if the proceeds of the policy are paid to the corporation, then the corporation’s incidents of ownership are not attributed to D.

Reason: proceeds increase the FMV of the stock, which is already included in the estate.

(b) To what extent are the proceeds includable if Corporation is the beneficiary of the policy?

(5) Taxpayer had an insurance policy on Taxpayer’s life on which Taxpayer had paid premiums for 10 years. The proceeds of the policy are $200,000 and are to be paid to Sibling on Taxpayer’s death. In the tenth year, Taxpayer conveyed the policy to Sibling, but, unless stated to the contrary, Taxpayer continued to pay the premiums. Taxpayer did not, however, retain “any incidents of ownership.”

(a) What are the estate tax consequences if Taxpayer dies two years after conveyance?

(b) What are the estate tax consequences if Taxpayer dies two years after conveyance, but Sibling has paid the post-transfer premiums?

(c) What are the estate tax consequences if Taxpayer dies four years after conveyance?

Answer rating: 100% (QA)

4 a When Insured dies the proceeds of the policy are included in his or her gross estate Because there were no events of ownership in the policy the minority shareholder was unable to exert control ov... View the full answer