Bob died on 1/1/19 survived by his wife, Candace, and three brothers, Don, Jim and Rex. By
Question:
Bob died on 1/1/19 survived by his wife, Candace, and three brothers, Don, Jim and Rex. By his will, Bob gave Candace a “preresiduary pecuniary formula” gift. (See “Funding Marital Gifts” in Chapter IX for explanation.) When the value of Bob's taxable estate is combined with his post-1976 taxable gifts, Candace receives $900,000 under the formula. Bob also made the following gifts:
1) to Don, all of my ABC stock;
2) to Jim, $200,000 to be satisfied in cash or in kind;
3) to Rex, the residue of my estate.
For the estate's one and only taxable year, it has the following items of receipt and expenditure:
ABC Dividends ..............$6,000
Other Dividends ............24,000
Statutory Fees ............(20,000)
Net receipts ..................10,000
On 10/1/20, Bob’s probate estate terminated, and Bob’s executor made the following distributions:
Asset | AB | FMV | |
Candace | Cash | 200,000 | 200,000 |
Blackacre | 500,000 | 600,000 | |
XYZ Stock | 250,000 | 100,000 | |
Total | 950,000 | 900,000 | |
Don | Cash | 6,000 | 6,000 |
XYZ Stock | 406,000 | 800,000 | |
Total | 406,000 | 806,000 | |
Jim | JKL Stock | 100,000 | 200,000 |
Rex | Cash | 63,212 | 63,212 |
MNO Stock | 200,000 | 250,000 | |
Total | 263,212 | 313,212 |
Questions:
a) To what extent, if any, will Bob’s estate recognize gain or loss on these distributions?
b) Which of these distributions is a “tier-2” distribution and what is the amount of the distribution for tax purposes?
c) Determine the estate’s taxable income and the amount and character of income taxable to each beneficiary.
South Western Federal Taxation 2014 Comprehensive Volume
ISBN: 9781285180922
37th edition
Authors: William H. Hoffman, David M. Maloney, William A. Raabe, James C. Young