Hello, I need help on this tax return homework. I uploaded the solution manual as a reference. I also uploaded the instruction to the question. My main concern is I don't know how they get the answers, so I need a complete explanation on how they get the answers. list any rules they might used to answer the questions. I don't know if this is true but my professor told us there is an error on the answer. Let me know if you find any error while you are checking the answers. I'm looking forward for your explanation. thanks,

ACC 433-01 CHAP 27 HOMEWORK ASSIGNMENT (due 6/3) YOU MUST DO THIS ASSIGNMENT WITH ONE PARTNER WHOM YOU HAVE NOT PREVIOUSLY PARTNERED WITH BEFORE Prepare a Gift Tax Return (Form 709) based upon Problem 7 of Appendix E in your textbook. A copy of Problem 7 is attached. You can use software such as the HR Block software, which comes with your textbook or other types of commercial software such as Turbo-Tax, LACERTE, Drake, etc. to prepare this income tax return. You may also handwrite the return, but make sure your writing is clear. If I can't read it, you will not receive points. Partial credit will be given on this assignment. Appendix E Practice Set Assignments-Comprehensive Tax Return Problems You must determine whether a Schedule M-3 is to be prepared. Cotton's accounting firm and the corporate books and records provide the following additional information. Distributions to shareholders $1,890,000 (831,400) Accumulated adjustments account (AAA), beginning balance Salaries and wages include $1.2 million of deferred compensation. ' Of the bad debt expense, $230,000 is not deductible this year. Of other expenses, $3,700 is permanently not deductible. Using the preceding information, prepare a complete Form l 120S and a Schedule K-1 for Max Martin, 1824 Church Street, Concord, NC 28025. If any information is missing, make realistic assumptions. James A. and Ella R. Polk, ages 70 and 65, are retired physicians who live at 13319 Taylorcrest Street, Houston, Texas 77079. Their three adult children (Benjamin Polk, Michael Polk, and Olivia Turner) are mature and responsible persons. The Polks have heard that the Obama administration has proposed lowering the Federal gift tax exclusion from $5.25 million to $3 million. Although this change may not occur, the Polks feel they should take advantage of the more generous exclusion available under existing law. Thus, in 2013, the Polks make transfers of many of their high value investments. These and other gifts made during 2013 are summarized below. Donor Asset Transfer Condominium located in Conroe (TX) acquired in 1999, cost $1.2 million, to Benjamin, Michael, and Olivia as equal tenants in common. Office building, located in Round Rock (TX) built in 2001, cost $1.8 million, to Benjamin, Michael, and Olivia as equal tenants in common. Vacation ranch in Bandera (TX) inherited by James from his father in 1996, value then $900,000, to Benjamin, Michael, and Olivia as equal joint tenants with right of survivorship. Ella used her separate property to reimburse her father (Alan Roberts) for his heart bypass operation. Paid for daughter's (Olivia's) wedding to John Turner James used his separate property to purchase a new automobile (BMW) as a graduation present (from medical school) for his favorite niece (Carol Polk) James Ella $1,800,000 $1,800,000 2,200,000 2,200,000 2,400,000 -0- -020,000 82,000 20,000 42,000 -0- Prepare 2013 gift tax returns (Form 709) for both of the Polks. A 2513 election to split gifts is made. The Polks have made no taxable gifts in prior years. Relevant Social Security numbers are 123-45-6789 (James) and 123-45-6788 (Ella). 8-ESTATE TAX (FORM 706) Harriet C. Harper, age 74, died as a result of an automobile accident on June 6, 2013. At the time of her death, Harriet lived' at 1520 Marlin Drive, Clearwater, FL 33758. She was predeceased by her husband, John W. Harper, who died in 2001. E-15 United States Gift (and Generation-Skipping Transfer) Tax Return 709 Form (For gifts made during calendar year 2013) Department of the Treasury Internal Revenue Service 1 Donor's first name and middle initial See instructions. 2 Donor's last name 3 POLK JAMES A. 4 OMB No. 1545-0020 Information about Form 709 and its separate instructions is at www.irs.gov/form709. 123-45-6789 Address (number, street, and apartment number) 5 Donor's social security number Legal residence (domicile) 13319 Taylorcrest Street USA 6 7 City, state, and ZIP or postal code Citizenship (see instructions) Houston, TX 77079 Foreign country name Foreign province/state/county Foreign postal code USA 8 If the donor died during the year, check here 9 . Yes No If you extended the time to file this Form 709, check here 10 and enter date of death Enter the total number of donees listed on Schedule A. Count each person only once. 5 11 a Have you (the donor) previously filed a Form 709 (or 709-A) for any other year? If "No," skip line 11b . . . . . . . . . . . . . . . . X. . . . . b Has your address changed since you last filed Form 709 (or 709-A)? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Gifts by husband or wife to third parties. Do you consent to have the gifts (including generation-skipping transfers) made by you and by your spouse to third parties during the calendar year considered as made one-half by each of you? (see instructions.) (If the answer is "Yes," the following information must be furnished and your spouse must sign the consent shown below. If the answer is "No," skip lines 13-18.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .X . . . . . . . ELLA R. POLK Name of consenting spouse 13 14 SSN 123-45-6788 Were you married to one another during the entire calendar year? (see instructions) . . . . . . . . . . . . . . . . . . . . X . . . . . . . 15 16 If 15 is "No," check whether married divorced or widowed/deceased, and give date (see instructions) 17 18 Will a gift tax return for this year be filed by your spouse? (If "Yes," mail both returns in the same envelope.) . . . . . . . . . . . X. . . . . . . Consent of Spouse. I consent to have the gifts (and generation-skipping transfers) made by me and by my spouse to third parties during the calendar year considered as made one-half by each of us. We are both aware of the joint and several liability for tax created by the execution of this consent. Consenting spouse's signature 19 Date Have you applied a DSUE amount received from a predeceased spouse to a gift or gifts reported on this or a previous Form 709? If "Yes," complete Schedule C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Enter the amount from Schedule A, Part 4, line 11 . . . . . . . . . . . . . . . . . . . . . 1 . . . . . . . 5,192,000 . . . . . . 2 Enter the amount from Schedule B, line 3 . . . . . . . . . . . . . . . . . . . . . . . . . 2 . . . . . . . . . . . . . . . . . . . . . . . 3 Total taxable gifts. Add lines 1 and 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 . . . . . . . 5,192,000 . . . . . . . . . . 4 Tax computed on amount on line 3 (see Table for Computing Gift Tax in instructions) . . . . . . . .4 . . . . . . . 2,022,600. . . . . . . 5 Tax computed on amount on line 2 (see Table for Computing Gift Tax in instructions) . . . . . . . .5 . . . . . . . . . . . . . . . . . . . . . . . 6 Balance. Subtract line 5 from line 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 . . . . . . . 2,022,600 . . . . . . 7 Applicable credit amount. If donor has DSUE amount from predeceased spouse(s), enter amount from Schedule C, line 4; otherwise, see instructions . . . . . . . . . . . . . . . .7 . . . . . . . 2,045,800 . . . . . . . . . . . 8 Enter the applicable credit against tax allowable for all prior periods (from Sch. B, line 1, col. C) . . . . . . . . . . . . . . . . . . . . . . 8 . . . . 9 Balance. Subtract line 8 from line 7. Do not enter less than zero . . . . . . . . . . . . . . . . . . . . . . . . 2,045,800. . . . . . . 9 10 Enter 20% (.20) of the amount allowed as a specific exemption for gifts made after September 8, 1976, and before January 1, 1977 (see instructions) . . . . . . . . . . . . . . . . . . . . 10 . . . . . . . . . . . . . . . . . . . 2,045,800 11 Balance. Subtract line 10 from line 9. Do not enter less than zero 11 . . . . . 12 Applicable credit. Enter the smaller of line 6 or line 11 . . . . . . . . . . . . . . . . . . . .12 . . . . . . .2,022,600 . . . . . . . 13 Credit for foreign gift taxes (see instructions) . . . . . . . . . . . . . . . . . . . . . . . 13 . . . . . . . . . . . . . . . . . . 2,022,600 . 14 Total credits. Add lines 12 and 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . .14 . . . . . . . . . . . . . . . . . . 15 Balance. Subtract line 14 from line 6. Do not enter less than zero . . . . . . . . . . . . . . . 15 . . . . . . . . . . . 0. . . . . . . 16 Generation-skipping transfer taxes (from Schedule D, Part 3, col. H, Total) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 . 17 Total tax. Add lines 15 and 16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 . . . . . . . . . . . 0 . . . . . . . 18 Gift and generation-skipping transfer taxes prepaid with extension of time to file . . . . . . . . . 18. . . . . . . . . . . . . . . . . . 19 If line 18 is less than line 17, enter balance due (see instructions) . . . . . . . . . . . . . . .19 . . . . . . . . . . 0 . . . . . . . . 20 If line 18 is greater than line 17, enter amount to be refunded . . . . . . . . . . . . . . . . 20 . . . . . . . . . . .0 . . . . . . . Sign Here Under penalties of perjury, I declare that I have examined this return, including any accompanying schedules and statements, and to the best of my knowledge and belief, it is true, correct, and complete. Declaration of preparer (other than donor) is based on all information of which preparer has any knowledge. May the IRS discuss this return with the preparer shown below (see instructions)? Yes No Signature of donor Paid Preparer Use Only Print/Type preparer's name Date Preparer's signature Date Firm's name PTIN Firm's EIN Firm's address Phone no. For Disclosure, Privacy Act, and Paperwork Reduction Act Notice, see the instructions for this form. HTA Check if self-employed Form 709 (2013) JAMES A. POLK Form 709 (2013) SCHEDULE A A 123-45-6789 Page 2 Computation of Taxable Gifts (Including transfers in trust) (see instructions) Does the value of any item listed on Schedule A reflect any valuation discount? If "Yes," attach explanation. . . . . . . Yes . . . No. . . . . . . . . . B Check here if you elect under section 529(c)(2)(B) to treat any transfers made this year to a qualified tuition program as made ratably over a 5-year period beginning this year. See instructions. Attach explanation. Part 1Gifts Subject Only to Gift Tax. Gifts less political organization, medical, and educational exclusions. (see instructions) A Item number 1 2 3 4 B Donee's name and address Relationship to donor (if any) Description of gift If the gift was of securities, give CUSIP no. If closely held entity, give EIN C D E F Donor's adjusted basis of gift Date of gift Value at date of gift Benjamin, Michael, and Olivia Polk; Children; Condominium; Conroe (TX) 1,200,000 2013 Benjamin, Michael, and Olivia Polk; Children; Office building; Round Rock (TX) 1,800,000 2013 Benjamin, Michael, and Olivia Polk; Children; Vacation ranch; Bandera (TX) 900,000 2013 Carol Polk; Niece; BMW 42,000 2013 1,800,000 2,200,000 2,400,000 42,000 G For split gifts, enter of column F H Net transfer (subtract col. G from col. F) 900,000 1,100,000 1,200,000 21,000 900,000 1,100,000 1,200,000 21,000 900,000 1,100,000 41,000 900,000 1,100,000 41,000 Gifts made by spousecomplete only if you are splitting gifts with your spouse and he/she also made gifts. 1 2 3 Benjamin, Michael, and Olivia Polk; Children; Condominium; Conroe (TX) 1,200,000 2013 Benjamin, Michael, and Olivia Polk; Children; Office building; Round Rock (TX) 1,800,000 2013 Alan Roberts; Father; Reimbursement 42,000 2013 1,800,000 2,200,000 82,000 Total of Part 1. Add amounts from Part 1, column H . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,262,000 . . . . . . . . . Part 2Direct Skips. Gifts that are direct skips and are subject to both gift tax and generation-skipping transfer tax. You must list the gifts in chronological order. A Item number B Donee's name and address Relationship to donor (if any) Description of gift If the gift was of securities, give CUSIP no. If closely held entity, give EIN C 2632(b) election out D E F Donor's adjusted basis of gift Date of gift Value at date of gift G For split gifts, enter of column F H Net transfer (subtract col. G from col. F) 0 1 0 Gifts made by spousecomplete only if you are splitting gifts with your spouse and he/she also made gifts. Total of Part 2. Add amounts from Part 2, column H . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 . . . . . Part 3Indirect Skips. Gifts to trusts that are currently subject to gift tax and may later be subject to generation-skipping transfer tax. You must list these gifts in chronological order. A Item number B Donee's name and address Relationship to donor (if any) Description of gift If the gift was of securities, give CUSIP no. If closely held entity, give EIN C D E F 2632(c) election Donor's adjusted basis of gift Date of gift Value at date of gift 1 G For split gifts, enter of column F H Net transfer (subtract col. G from col. F) 0 0 Gifts made by spousecomplete only if you are splitting gifts with your spouse and he/she also made gifts. Total of Part 3. Add amounts from Part 3, column H . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 . . . . . (If more space is needed, attach additional statements.) Form 709 (2013) JAMES A. POLK Part 4Taxable Gift Reconciliation 123-45-6789 Form 709 (2013) Page 3 Total value of gifts of donor. Add totals from column H of Parts 1, 2, and 3 . . . . . . . . . . . . . . . . . .1 . . . . 5,262,000. . . . . . . . . . . 1 Total annual exclusions for gifts listed on line 1 (see instructions) . . . . . . . . . . . . . . . . . . . . . 2 . . . . . 70,000 . . . . . . . . . . 2 Total included amount of gifts. Subtract line 2 from line 1 . . . . . . . . . . . . . . . . . . . . . . . . 3 . . . . 5,192,000. . . . . . . . . . . . 3 Deductions (see instructions) Gifts of interests to spouse for which a marital deduction will be claimed, based on 4 item numbers of Schedule A . . . . . . 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . Exclusions attributable to gifts on line 4 . . . . . . . . . . . . . . . . . . . 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 0 Marital deduction. Subtract line 5 from line 4 . . . . . . . . . . . . . . . . . 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Charitable deduction, based on item nos. less exclusions . . . 7. . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Total deductions. Add lines 6 and 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 . . . . . . . . 0 . . . . . . . 8 Subtract line 8 from line 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 . . . . 5,192,000 . . . . . . . . . . . 9 Generation-skipping transfer taxes payable with this Form 709 (from Schedule D, Part 3, col. H, Total) . . . . . . 10 . . . . . . . . . . . . . . . . 10 11 Taxable gifts. Add lines 9 and 10. Enter here and on page 1, Part 2Tax Computation, line 1 . . . . . . . . . 11 . . . . 5,192,000 . . . . . . . . . . . . Terminable Interest (QTIP) Marital Deduction. (see instructions for Schedule A, Part 4, line 4.) If a trust (or other property) meets the requirements of qualified terminable interest property under section 2523(f), and: a. The trust (or other property) is listed on Schedule A, and b. The value of the trust (or other property) is entered in whole or in part as a deduction on Schedule A, Part 4, line 4, then the donor shall be deemed to have made an election to have such trust (or other property) treated as qualified terminable interest property under section 2523(f). If less than the entire value of the trust (or other property) that the donor has included in Parts 1 and 3 of Schedule A is entered as a deduction on line 4, the donor shall be considered to have made an election only as to a fraction of the trust (or other property). The numerator of this fraction is equal to the amount of the trust (or other property) deducted on Schedule A, Part 4, line 6. The denominator is equal to the total value of the trust (or other property) listed in Parts 1 and 3 of Schedule A. If you make the QTIP election, the terminable interest property involved will be included in your spouse's gross estate upon his or her death (section 2044). See instructions for line 4 of Schedule A. If your spouse disposes (by gift or otherwise) of all or part of the qualifying life income interest, he or she will be considered to have made a transfer of the entire property that is subject to the gift tax. See Transfer of Certain Life Estates Received From Spouse in the instructions. 12 Election Out of QTIP Treatment of Annuities Check here if you elect under section 2523(f)(6) not to treat as qualified terminable interest property any joint and survivor annuities that are reported on Schedule A and would otherwise be treated as qualified terminable interest property under section 2523(f). See instructions. Enter the item numbers from Schedule A for the annuities for which you are making this election SCHEDULE B Gifts From Prior Periods If you answered "Yes," on line 11a of page 1, Part 1, see the instructions for completing Schedule B. If you answered "No," skip to the Tax Computation on page 1 (or Schedules C or D, if applicable). Complete Schedule A before beginning Schedule B. See instructions for recalculation of the column C amounts. Attach calculations. C A Calendar year or calendar quarter (see instructions) B Internal Revenue office where prior return was filed Amount of applicable credit (unified credit) against gift tax for periods after December 31, 1976. D Amount of specific exemption for prior periods ending before January 1, 1977 E Amount of taxable gifts 1 Totals for prior periods . . . . . . . . . . . . . . . . . 1 . . . . . . . . . . . 0 . . . . . . . . . . 0. . . . . . . . 0. . . . . . . . 2 3 Amount, if any, by which total specific exemption, line 1, column D is more than $30,000 . . . . . . . . . . . . 2 . . . . . . . . 0 . . . . . . . . Total amount of taxable gifts for prior periods. Add amount on line 1, column E and amount, if any, on line 2. Enter here and on page 1, Part 2Tax Computation, line 2 . . . . . . . . . . . . . . . . . . . . . . . . 3 . . . . . . . . 0 . . . . . . . . (If more space is needed, attach additional statements.) Form 709 (2013) JAMES A. POLK Form 709 (2013) SCHEDULE C 123-45-6789 Page 4 Deceased Spousal Unused Exclusion (DSUE) Amount Provide the following information to determine the DSUE amount and applicable credit received from prior spouses. Complete Schedule A before beginning Schedule C. A B C D E F Name of Deceased Spouse (dates of death after December 31, 2010 only) Date of Death Portability Election Made? If "Yes," DSUE Amount Received from Spouse DSUE Amount Applied by Donor to Lifetime Gifts (list current and prior gifts) Date of Gift(s) (enter as mm/dd/yy for Part 1 and as yyyy for Part 2) Yes No Part 1DSUE RECEIVED FROM LAST DECEASED SPOUSE Part 2DSUE RECEIVED FROM PREDECEASED SPOUSE(S) 1 2 3 4 0 TOTAL (for all DSUE amounts applied for Part 1 and Part 2) Donor's basic exclusion amount (see instructions) . . . . . . . . . . . . . . . . . . . . . . . Total from column E, Parts 1 and 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Add lines 1 and 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Applicable credit on amount in line 3 (See Table for Computing Gift Tax in the instructions). Enter here and on line 7, Part 2Tax Computation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SCHEDULE D . . . .1 . . . . . . . . . . . . . . . . . . . .2 . . . . . . . . . 0. . . . . . . . . . .3 . . . . . . . . . 0. . . . . . . . . . .4 . . . . . . . . . 0. . . . . . . Computation of Generation-Skipping Transfer Tax Note. Inter vivos direct skips that are completely excluded by the GST exemption must still be fully reported (including value and exemptions claimed) on Schedule D. Part 1Generation-Skipping Transfers A Item No. (from Schedule A, Part 2, col. A) B Value (from Schedule A, Part 2, col. H) C Nontaxable Portion of Transfer D Net Transfer (subtract col. C from col. B) 0 0 0 0 0 0 1 Gifts made by spouse (for gift splitting only) 0 0 0 0 0 0 (If more space is needed, attach additional statements.) Form 709 (2013) JAMES A. POLK Form 709 (2013) 123-45-6789 Page 5 Part 2GST Exemption Reconciliation (Section 2631) and Section 2652(a)(3) Election Check here if you are making a section 2652(a)(3) (special QTIP) election (see instructions) Enter the item numbers from Schedule A of the gifts for which you are making this election 1 Maximum allowable exemption (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 . . . . . 5,250,000 . . . . . . . 2 Total exemption used for periods before filing this return . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 . . . . . . . . . . . . 3 Exemption available for this return. Subtract line 2 from line 1 . . . . . . . . . . . . . . . . . . . . . . . . . . 3 . . . . . 5,250,000 . . . . . . . 4 Exemption claimed on this return from Part 3, column C total, below . . . . . . . . . . . . . . . . . . . . . . . 4 . . . . . . . . . . . . 5 6 Automatic allocation of exemption to transfers reported on Schedule A, Part 3 (see instructions) . . . . . . . . . . . . .5 . . . . . . . . . . . . 7 Add lines 4, 5, and 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7. . . . . . . . . 0 . . . Exemption allocated to transfers not shown on line 4 or 5, above. You must attach a "Notice of Allocation." (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 . . . . . . . . . . . Exemption available for future transfers. Subtract line 7 from line 3 . . . . . . . . . . . . . . . . . . . . . . . . 8 . . . . . 5,250,000 . . . . . . . 8 Part 3Tax Computation A B Item No. (from Schedule D, Part 1) Net Transfer (from Schedule D, Part 1, col. D) C GST Exemption Allocated D Divide col. C by col. B E Inclusion Ratio (Subtract col. D from 1.000) F Maximum Estate Tax Rate 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 40% (.4) 0.000 0.000 0.000 0.000 0.000 0.000 1 0.000 0.000 0.000 0.000 0.000 0.000 40% (.4) 40% (.4) 40% (.4) 40% (.4) 40% (.4) 40% (.4) G H Applicable Rate (multiply col. E by col. F) Generation-Skipping Transfer Tax (multiply col. B by col. G) 0.000 0.000 0.000 0.000 0.000 0.000 0 0 0 0 0 0 0.000 0.000 0.000 0.000 0.000 0.000 0 0 0 0 0 0 Gifts made by spouse (for gift splitting only) 40% (.4) 40% (.4) 40% (.4) 40% (.4) 40% (.4) Total exemption claimed. Enter here and on Part 2, line 4, above Total generation-skipping transfer tax. Enter here; on page 3, May not exceed Part 2, line 3, Schedule A, Part 4, line 10; and on page 1, Part 2Tax above . . . . . . . . . . . . . . . . . . . . 0 . Computation, . . 16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 . . . . . . . . line . . (If more space is needed, attach additional statements.) Form 709 (2013) JAMES A. POLK 123-45-6789 Sch A, Part 1 (709) - Gifts Subject Only to Gift Tax Made by Filer/Joint Total > 3,221,000 B A Donee's name and address Item Relationship to donor (if any) # C E F G H Date Value at For split Net transfer basis of gift of gift date of gift gifts, enter (subtract of col. G from column F Description of gift D Donor's adjusted col. F) If the gift was of securities, give CUSIP no. If closely held entity, give EIN 1 2 3 4 Benjamin, Michael, and Olivia Polk; Children; Condominium; Conroe (TX) 1,200,000 2013 Benjamin, Michael, and Olivia Polk; Children; Office building; Round Rock (TX) 1,800,000 2013 Benjamin, Michael, and Olivia Polk; Children; Vacation ranch; Bandera2013 900,000 (TX) Carol Polk; Niece; BMW 42,000 2013 1,800,000 2,200,000 2,400,000 42,000 900,000 1,100,000 1,200,000 21,000 900,000 1,100,000 1,200,000 21,000 Sch A, Part 1 (709) - Gifts Subject Only to Gift Tax Made by Spouse (When Splitting Gifts) Total > 2,041,000 B A Donee's name and address Item Relationship to donor (if any) # Description of gift C D E F G H Donor's adjusted Date Value at For split Net transfer basis of gift of gift date of gift gifts, enter (subtract of col. G from column F col. F) If the gift was of securities, give CUSIP no. If closely held entity, give EIN 1 2 3 Benjamin, Michael, and Olivia Polk; Children; Condominium; Conroe (TX) 1,200,000 2013 Benjamin, Michael, and Olivia Polk; Children; Office building; Round Rock (TX) 1,800,000 2013 Alan Roberts; Father; Reimbursement 42,000 2013 2013 CCH Small Firm Services. All rights reserved. 1,800,000 2,200,000 82,000 900,000 1,100,000 41,000 900,000 1,100,000 41,000 United States Gift (and Generation-Skipping Transfer) Tax Return 709 Form (For gifts made during calendar year 2013) Department of the Treasury Internal Revenue Service 1 Donor's first name and middle initial See instructions. 2 Donor's last name 3 POLK ELLA R. 4 OMB No. 1545-0020 Information about Form 709 and its separate instructions is at www.irs.gov/form709. 123-45-6788 Address (number, street, and apartment number) 5 Donor's social security number Legal residence (domicile) 13319 Taylorcrest Street USA 6 7 City, state, and ZIP or postal code Citizenship (see instructions) Houston, TX 77079 Foreign country name Foreign province/state/county Foreign postal code USA 8 If the donor died during the year, check here 9 . Yes No If you extended the time to file this Form 709, check here 10 and enter date of death Enter the total number of donees listed on Schedule A. Count each person only once. 5 11 a Have you (the donor) previously filed a Form 709 (or 709-A) for any other year? If "No," skip line 11b . . . . . . . . . . . . . . . . X. . . . . b Has your address changed since you last filed Form 709 (or 709-A)? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Gifts by husband or wife to third parties. Do you consent to have the gifts (including generation-skipping transfers) made by you and by your spouse to third parties during the calendar year considered as made one-half by each of you? (see instructions.) (If the answer is "Yes," the following information must be furnished and your spouse must sign the consent shown below. If the answer is "No," skip lines 13-18.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .X . . . . . . . JAMES A. POLK Name of consenting spouse 13 14 SSN 123-45-6789 Were you married to one another during the entire calendar year? (see instructions) . . . . . . . . . . . . . . . . . . . . X . . . . . . . 15 16 If 15 is "No," check whether married divorced or widowed/deceased, and give date (see instructions) 17 18 Will a gift tax return for this year be filed by your spouse? (If "Yes," mail both returns in the same envelope.) . . . . . . . . . . . X. . . . . . . Consent of Spouse. I consent to have the gifts (and generation-skipping transfers) made by me and by my spouse to third parties during the calendar year considered as made one-half by each of us. We are both aware of the joint and several liability for tax created by the execution of this consent. Consenting spouse's signature 19 Date Have you applied a DSUE amount received from a predeceased spouse to a gift or gifts reported on this or a previous Form 709? If "Yes," complete Schedule C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Enter the amount from Schedule A, Part 4, line 11 . . . . . . . . . . . . . . . . . . . . . 1 . . . . . . . 5,192,000 . . . . . . 2 Enter the amount from Schedule B, line 3 . . . . . . . . . . . . . . . . . . . . . . . . . 2 . . . . . . . . . . . . . . . . . . . . . . . 3 Total taxable gifts. Add lines 1 and 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 . . . . . . . 5,192,000 . . . . . . . . . . 4 Tax computed on amount on line 3 (see Table for Computing Gift Tax in instructions) . . . . . . . .4 . . . . . . . 2,022,600. . . . . . . 5 Tax computed on amount on line 2 (see Table for Computing Gift Tax in instructions) . . . . . . . .5 . . . . . . . . . . . . . . . . . . . . . . . 6 Balance. Subtract line 5 from line 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 . . . . . . . 2,022,600 . . . . . . 7 Applicable credit amount. If donor has DSUE amount from predeceased spouse(s), enter amount from Schedule C, line 4; otherwise, see instructions . . . . . . . . . . . . . . . .7 . . . . . . . 2,045,800 . . . . . . . . . . . 8 Enter the applicable credit against tax allowable for all prior periods (from Sch. B, line 1, col. C) . . . . . . . . . . . . . . . . . . . . . . 8 . . . . 9 Balance. Subtract line 8 from line 7. Do not enter less than zero . . . . . . . . . . . . . . . . . . . . . . . . 2,045,800. . . . . . . 9 10 Enter 20% (.20) of the amount allowed as a specific exemption for gifts made after September 8, 1976, and before January 1, 1977 (see instructions) . . . . . . . . . . . . . . . . . . . . 10 . . . . . . . . . . . . . . . . . . . 2,045,800 11 Balance. Subtract line 10 from line 9. Do not enter less than zero 11 . . . . . 12 Applicable credit. Enter the smaller of line 6 or line 11 . . . . . . . . . . . . . . . . . . . .12 . . . . . . .2,022,600 . . . . . . . 13 Credit for foreign gift taxes (see instructions) . . . . . . . . . . . . . . . . . . . . . . . 13 . . . . . . . . . . . . . . . . . . 2,022,600 . 14 Total credits. Add lines 12 and 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . .14 . . . . . . . . . . . . . . . . . . 15 Balance. Subtract line 14 from line 6. Do not enter less than zero . . . . . . . . . . . . . . . 15 . . . . . . . . . . . 0. . . . . . . 16 Generation-skipping transfer taxes (from Schedule D, Part 3, col. H, Total) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 . 17 Total tax. Add lines 15 and 16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 . . . . . . . . . . . 0 . . . . . . . 18 Gift and generation-skipping transfer taxes prepaid with extension of time to file . . . . . . . . . 18. . . . . . . . . . . . . . . . . . 19 If line 18 is less than line 17, enter balance due (see instructions) . . . . . . . . . . . . . . .19 . . . . . . . . . . 0 . . . . . . . . 20 If line 18 is greater than line 17, enter amount to be refunded . . . . . . . . . . . . . . . . 20 . . . . . . . . . . .0 . . . . . . . Sign Here Under penalties of perjury, I declare that I have examined this return, including any accompanying schedules and statements, and to the best of my knowledge and belief, it is true, correct, and complete. Declaration of preparer (other than donor) is based on all information of which preparer has any knowledge. May the IRS discuss this return with the preparer shown below (see instructions)? Yes No Signature of donor Paid Preparer Use Only Print/Type preparer's name Date Preparer's signature Date Firm's name PTIN Firm's EIN Firm's address Phone no. For Disclosure, Privacy Act, and Paperwork Reduction Act Notice, see the instructions for this form. HTA Check if self-employed Form 709 (2013) ELLA R. POLK Form 709 (2013) SCHEDULE A A 123-45-6788 Page 2 Computation of Taxable Gifts (Including transfers in trust) (see instructions) Does the value of any item listed on Schedule A reflect any valuation discount? If "Yes," attach explanation. . . . . . . Yes . . . No. . . . . . . . . . B Check here if you elect under section 529(c)(2)(B) to treat any transfers made this year to a qualified tuition program as made ratably over a 5-year period beginning this year. See instructions. Attach explanation. Part 1Gifts Subject Only to Gift Tax. Gifts less political organization, medical, and educational exclusions. (see instructions) A Item number 1 2 3 B Donee's name and address Relationship to donor (if any) Description of gift If the gift was of securities, give CUSIP no. If closely held entity, give EIN C D E F Donor's adjusted basis of gift Date of gift Value at date of gift Benjamin, Michael, and Olivia Polk; Children; Condominium; Conroe (TX) 1,200,000 2013 Benjamin, Michael, and Olivia Polk; Children; Office building; Round Rock (TX) 1,800,000 2013 Alan Roberts; Father; Reimbursement 82,000 2013 1,800,000 2,200,000 82,000 G For split gifts, enter of column F H Net transfer (subtract col. G from col. F) 900,000 1,100,000 41,000 900,000 1,100,000 41,000 Gifts made by spousecomplete only if you are splitting gifts with your spouse and he/she also made gifts. 900,000 1,100,000 1,200,000 21,000 Total of Part 1. Add amounts from Part 1, column H . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,262,000 . . . . . . . . . 1 2 3 4 Benjamin, Michael, and Olivia Polk; Children; Condominium; Conroe (TX) 1,200,000 2013 Benjamin, Michael, and Olivia Polk; Children; Office building; Round Rock (TX) 1,800,000 2013 Benjamin, Michael, and Olivia Polk; Children; Vacation1,800,000 ranch; Bandera (TX) 2013 Carol Polk; Niece; BMW 42,000 2013 1,800,000 2,200,000 2,400,000 42,000 900,000 1,100,000 1,200,000 21,000 Part 2Direct Skips. Gifts that are direct skips and are subject to both gift tax and generation-skipping transfer tax. You must list the gifts in chronological order. A Item number B Donee's name and address Relationship to donor (if any) Description of gift If the gift was of securities, give CUSIP no. If closely held entity, give EIN C 2632(b) election out D E F Donor's adjusted basis of gift Date of gift Value at date of gift G For split gifts, enter of column F H Net transfer (subtract col. G from col. F) 0 1 0 Gifts made by spousecomplete only if you are splitting gifts with your spouse and he/she also made gifts. Total of Part 2. Add amounts from Part 2, column H . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 . . . . . Part 3Indirect Skips. Gifts to trusts that are currently subject to gift tax and may later be subject to generation-skipping transfer tax. You must list these gifts in chronological order. A Item number B Donee's name and address Relationship to donor (if any) Description of gift If the gift was of securities, give CUSIP no. If closely held entity, give EIN C D E F 2632(c) election Donor's adjusted basis of gift Date of gift Value at date of gift 1 G For split gifts, enter of column F H Net transfer (subtract col. G from col. F) 0 0 Gifts made by spousecomplete only if you are splitting gifts with your spouse and he/she also made gifts. Total of Part 3. Add amounts from Part 3, column H . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 . . . . . (If more space is needed, attach additional statements.) Form 709 (2013) ELLA R. POLK Part 4Taxable Gift Reconciliation 123-45-6788 Form 709 (2013) Page 3 Total value of gifts of donor. Add totals from column H of Parts 1, 2, and 3 . . . . . . . . . . . . . . . . . .1 . . . . 5,262,000. . . . . . . . . . . 1 Total annual exclusions for gifts listed on line 1 (see instructions) . . . . . . . . . . . . . . . . . . . . . 2 . . . . . 70,000 . . . . . . . . . . 2 Total included amount of gifts. Subtract line 2 from line 1 . . . . . . . . . . . . . . . . . . . . . . . . 3 . . . . 5,192,000. . . . . . . . . . . . 3 Deductions (see instructions) Gifts of interests to spouse for which a marital deduction will be claimed, based on 4 item numbers of Schedule A . . . . . . 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . Exclusions attributable to gifts on line 4 . . . . . . . . . . . . . . . . . . . 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 0 Marital deduction. Subtract line 5 from line 4 . . . . . . . . . . . . . . . . . 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Charitable deduction, based on item nos. less exclusions . . . 7. . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Total deductions. Add lines 6 and 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 . . . . . . . . 0 . . . . . . . 8 Subtract line 8 from line 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 . . . . 5,192,000 . . . . . . . . . . . 9 Generation-skipping transfer taxes payable with this Form 709 (from Schedule D, Part 3, col. H, Total) . . . . . . 10 . . . . . . . . . . . . . . . . 10 11 Taxable gifts. Add lines 9 and 10. Enter here and on page 1, Part 2Tax Computation, line 1 . . . . . . . . . 11 . . . . 5,192,000 . . . . . . . . . . . . Terminable Interest (QTIP) Marital Deduction. (see instructions for Schedule A, Part 4, line 4.) If a trust (or other property) meets the requirements of qualified terminable interest property under section 2523(f), and: a. The trust (or other property) is listed on Schedule A, and b. The value of the trust (or other property) is entered in whole or in part as a deduction on Schedule A, Part 4, line 4, then the donor shall be deemed to have made an election to have such trust (or other property) treated as qualified terminable interest property under section 2523(f). If less than the entire value of the trust (or other property) that the donor has included in Parts 1 and 3 of Schedule A is entered as a deduction on line 4, the donor shall be considered to have made an election only as to a fraction of the trust (or other property). The numerator of this fraction is equal to the amount of the trust (or other property) deducted on Schedule A, Part 4, line 6. The denominator is equal to the total value of the trust (or other property) listed in Parts 1 and 3 of Schedule A. If you make the QTIP election, the terminable interest property involved will be included in your spouse's gross estate upon his or her death (section 2044). See instructions for line 4 of Schedule A. If your spouse disposes (by gift or otherwise) of all or part of the qualifying life income interest, he or she will be considered to have made a transfer of the entire property that is subject to the gift tax. See Transfer of Certain Life Estates Received From Spouse in the instructions. 12 Election Out of QTIP Treatment of Annuities Check here if you elect under section 2523(f)(6) not to treat as qualified terminable interest property any joint and survivor annuities that are reported on Schedule A and would otherwise be treated as qualified terminable interest property under section 2523(f). See instructions. Enter the item numbers from Schedule A for the annuities for which you are making this election SCHEDULE B Gifts From Prior Periods If you answered "Yes," on line 11a of page 1, Part 1, see the instructions for completing Schedule B. If you answered "No," skip to the Tax Computation on page 1 (or Schedules C or D, if applicable). Complete Schedule A before beginning Schedule B. See instructions for recalculation of the column C amounts. Attach calculations. C A Calendar year or calendar quarter (see instructions) B Internal Revenue office where prior return was filed Amount of applicable credit (unified credit) against gift tax for periods after December 31, 1976. D Amount of specific exemption for prior periods ending before January 1, 1977 E Amount of taxable gifts 1 Totals for prior periods . . . . . . . . . . . . . . . . . 1 . . . . . . . . . . . 0 . . . . . . . . . . 0. . . . . . . . 0. . . . . . . . 2 3 Amount, if any, by which total specific exemption, line 1, column D is more than $30,000 . . . . . . . . . . . . 2 . . . . . . . . 0 . . . . . . . . Total amount of taxable gifts for prior periods. Add amount on line 1, column E and amount, if any, on line 2. Enter here and on page 1, Part 2Tax Computation, line 2 . . . . . . . . . . . . . . . . . . . . . . . . 3 . . . . . . . . 0 . . . . . . . . (If more space is needed, attach additional statements.) Form 709 (2013) ELLA R. POLK Form 709 (2013) SCHEDULE C 123-45-6788 Page 4 Deceased Spousal Unused Exclusion (DSUE) Amount Provide the following information to determine the DSUE amount and applicable credit received from prior spouses. Complete Schedule A before beginning Schedule C. A B C D E F Name of Deceased Spouse (dates of death after December 31, 2010 only) Date of Death Portability Election Made? If "Yes," DSUE Amount Received from Spouse DSUE Amount Applied by Donor to Lifetime Gifts (list current and prior gifts) Date of Gift(s) (enter as mm/dd/yy for Part 1 and as yyyy for Part 2) Yes No Part 1DSUE RECEIVED FROM LAST DECEASED SPOUSE Part 2DSUE RECEIVED FROM PREDECEASED SPOUSE(S) 1 2 3 4 0 TOTAL (for all DSUE amounts applied for Part 1 and Part 2) Donor's basic exclusion amount (see instructions) . . . . . . . . . . . . . . . . . . . . . . . Total from column E, Parts 1 and 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Add lines 1 and 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Applicable credit on amount in line 3 (See Table for Computing Gift Tax in the instructions). Enter here and on line 7, Part 2Tax Computation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SCHEDULE D . . . .1 . . . . . . . . . . . . . . . . . . . .2 . . . . . . . . . 0. . . . . . . . . . .3 . . . . . . . . . 0. . . . . . . . . . .4 . . . . . . . . . 0. . . . . . . Computation of Generation-Skipping Transfer Tax Note. Inter vivos direct skips that are completely excluded by the GST exemption must still be fully reported (including value and exemptions claimed) on Schedule D. Part 1Generation-Skipping Transfers A Item No. (from Schedule A, Part 2, col. A) B Value (from Schedule A, Part 2, col. H) C Nontaxable Portion of Transfer D Net Transfer (subtract col. C from col. B) 0 0 0 0 0 0 1 Gifts made by spouse (for gift splitting only) 0 0 0 0 0 0 (If more space is needed, attach additional statements.) Form 709 (2013) ELLA R. POLK Form 709 (2013) 123-45-6788 Page 5 Part 2GST Exemption Reconciliation (Section 2631) and Section 2652(a)(3) Election Check here if you are making a section 2652(a)(3) (special QTIP) election (see instructions) Enter the item numbers from Schedule A of the gifts for which you are making this election 1 Maximum allowable exemption (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 . . . . . 5,250,000 . . . . . . . 2 Total exemption used for periods before filing this return . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 . . . . . . . . . . . . 3 Exemption available for this return. Subtract line 2 from line 1 . . . . . . . . . . . . . . . . . . . . . . . . . . 3 . . . . . 5,250,000 . . . . . . . 4 Exemption claimed on this return from Part 3, column C total, below . . . . . . . . . . . . . . . . . . . . . . . 4 . . . . . . . . . . . . 5 6 Automatic allocation of exemption to transfers reported on Schedule A, Part 3 (see instructions) . . . . . . . . . . . . .5 . . . . . . . . . . . . 7 Add lines 4, 5, and 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7. . . . . . . . . 0 . . . Exemption allocated to transfers not shown on line 4 or 5, above. You must attach a "Notice of Allocation." (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 . . . . . . . . . . . Exemption available for future transfers. Subtract line 7 from line 3 . . . . . . . . . . . . . . . . . . . . . . . . 8 . . . . . 5,250,000 . . . . . . . 8 Part 3Tax Computation A B Item No. (from Schedule D, Part 1) Net Transfer (from Schedule D, Part 1, col. D) C GST Exemption Allocated D Divide col. C by col. B E Inclusion Ratio (Subtract col. D from 1.000) F Maximum Estate Tax Rate 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 40% (.4) 0.000 0.000 0.000 0.000 0.000 0.000 1 0.000 0.000 0.000 0.000 0.000 0.000 40% (.4) 40% (.4) 40% (.4) 40% (.4) 40% (.4) 40% (.4) G H Applicable Rate (multiply col. E by col. F) Generation-Skipping Transfer Tax (multiply col. B by col. G) 0.000 0.000 0.000 0.000 0.000 0.000 0 0 0 0 0 0 0.000 0.000 0.000 0.000 0.000 0.000 0 0 0 0 0 0 Gifts made by spouse (for gift splitting only) 40% (.4) 40% (.4) 40% (.4) 40% (.4) 40% (.4) Total exemption claimed. Enter here and on Part 2, line 4, above Total generation-skipping transfer tax. Enter here; on page 3, May not exceed Part 2, line 3, Schedule A, Part 4, line 10; and on page 1, Part 2Tax above . . . . . . . . . . . . . . . . . . . . 0 . Computation, . . 16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 . . . . . . . . line . . (If more space is needed, attach additional statements.) Form 709 (2013) ELLA R. POLK 123-45-6788 Sch A, Part 1 (709) - Gifts Subject Only to Gift Tax Made by Filer/Joint Total > 2,041,000 B A Donee's name and address Item Relationship to donor (if any) # C E F G H Date Value at For split Net transfer basis of gift of gift date of gift gifts, enter (subtract of col. G from column F Description of gift D Donor's adjusted col. F) If the gift was of securities, give CUSIP no. If closely held entity, give EIN 1 2 3 Benjamin, Michael, and Olivia Polk; Children; Condominium; Conroe (TX) 1,200,000 2013 Benjamin, Michael, and Olivia Polk; Children; Office building; Round Rock (TX) 1,800,000 2013 Alan Roberts; Father; Reimbursement 82,000 2013 1,800,000 2,200,000 82,000 900,000 1,100,000 41,000 900,000 1,100,000 41,000 Sch A, Part 1 (709) - Gifts Subject Only to Gift Tax Made by Spouse (When Splitting Gifts) Total > 3,221,000 B A Donee's name and address Item Relationship to donor (if any) # Description of gift C D E F G H Donor's adjusted Date Value at For split Net transfer basis of gift of gift date of gift gifts, enter (subtract of col. G from column F col. F) If the gift was of securities, give CUSIP no. If closely held entity, give EIN 1 2 3 4 Benjamin, Michael, and Olivia Polk; Children; Condominium; Conroe (TX) 1,200,000 2013 Benjamin, Michael, and Olivia Polk; Children; Office building; Round Rock (TX) 1,800,000 2013 Benjamin, Michael, and Olivia Polk; Children; Vacation ranch; Bandera2013 1,800,000 (TX) Carol Polk; Niece; BMW 42,000 2013 2013 CCH Small Firm Services. All rights reserved. 1,800,000 2,200,000 2,400,000 42,000 900,000 1,100,000 1,200,000 21,000 900,000 1,100,000 1,200,000 21,000