Mel made the following gifts to his children during 2018: Mel gave $200,000 of separate property...

Transcribed Image Text:

Mel made the following gifts to his children during 2018: Mel gave $200,000 of separate property to Hanna. Mel paid $308,000 to Stanford for Christian's undergraduate tuition. Mel gave Christian a Range Rover valued at $128,500 to celebrate his success at Stanford. Mel also gave each grandchild $10,000 each. GIFTS TO GRANDCHILDREN in 2019 Mel made the following gifts to his grandchildren during 2019: Seeing how Mel's mom outlived her assets, Mel is afraid his grandchildren may have the same fate. To assist them with their retirement income, Mel decided to establish a trust for the grandchildren. The trust is an irrevocable trust and he funded it in the current year with $950,000. The trust will accumulate income until each grandchild reaches age 50. When a grandchild reaches age 50, he/she will begin receiving an annuity for their life. When all of the grandchildren die, if there is any remaining assets then the trustee may distribute those assets to a charitable organization of his choosing. Mel sent a check in the amount of $18,000 directly to William's private school to pay her tuition. Mel also gave each grandchild $10,000 each. Assume Mel paid gift tax of $3,820,000 in 2017 for taxable gifts in the amount of $15,000,000 made in 2016. These were his first taxable gifts. MEL'S STATEMENT OF FINANCIAL POSITION AS OF 12/31/22 (AFTER THE GIFT TO OKSANA) ASSETS LIABILITIES AND NET WORTH Liabilities Cash & Cash Equivalents Cash $982,466.00 Primary Residence $1,350,000.00 Total Cash/Cash Equiv. $982,466.00 AMEX Black $480.250.00 Total Current Liabilities $1,830,250.00 Invested Assets Braveheart $1,863,100.00 Investment Portfolio $11,322,875.00 Qualified Plan $9,494,010.00 Total Investments $22,679,985.00 Personal Use Assets Net Worth $33,890,926.00 $8,745,625.00 $1,823,200.00 Primary Residence Vacation Property Auto 1 $164,250.00 Yacht $1,325,650.00 Total Personal Use $12,058,725.00 Total Assets $35,721,176.00 Total Liabilities and Net Worth $35,721,176.00 Notes to Financial Statements: 1. Assets are stated at fair market value (rounded to even dollars). 2. Liabilities are stated at principal only (rounded to even dollars). 3. Braveheart was valued last week for insurance purposes. The valuation includes $1,000,000 for the land and $850,000 for the business. 4. The qualified plan has Robyn listed as the designated beneficiary. The Investment Portfolio is a Transfer on Death (TOD) account with Hanna and Christian as the listed beneficiaries. 5. The adjusted basis of the primary residence is $4,000,000. 6. Mel received the vacation property as an inter vivos gift from his grandfather, Otto. Otto purchased the vacation property for $10,000 and the FMV of the property at the date of transfer to Mel was $30,000. The FMV when Otto died was $90,000. The annual exclusion did not apply to the transfer and the gift tax paid was $15,400. 7. The yacht is owned joint tenancy with rights of survivorship with Robyn. They each contributed 50% of the purchase price. The Statement of Financial Position only reflects Mel's interest. 8. Mel's state does not have any statutes that invalidate bequests or beneficiary designations to prior spouses. 9. This statement is prepared after all the gifts were made, including the one to Oksana, and the gift tax has been paid for the 2015 gifts. 2. Assuming Mel died December 31, 2022, calculate his gross estate. For full credit, identify each asset and its value. (Value - 10 points) 3. Assuming Mel died December 31, 2022, calculate his probate estate. For full credit, identify each asset and its value. (Value - 10 points) 4. Assuming Mel died December 31, 2022, calculate the Marital Deduction available for estate transfers to Oksana. (Value - 10 points) 5. Assume Mel died December 31, 2022. For this question only, assume that the estate tax liability due is $10,605,111, and Hanna is appointed executor. Unfortunately, Hanna forgot to file an Estate Tax Return (Form 706) and pay the estate tax due until 38 days after the return's due date. How much is the total penalty for failure-to-file and failure-to-pay? (Note this is not the actual estate tax liability due.) (Value -10 points) 6. What is the amount of Mel's total taxable gifts for 2018 and 2019 (less the annual exclusion and qualified transfers)? (Value - 10 points) 7. Calculate Mel's gift tax due for 2018 and 2019. Show your work. Even if the tax due is zero, show your calculation to earn full credit. (Value - 10 points) Mel made the following gifts to his children during 2018: Mel gave $200,000 of separate property to Hanna. Mel paid $308,000 to Stanford for Christian's undergraduate tuition. Mel gave Christian a Range Rover valued at $128,500 to celebrate his success at Stanford. Mel also gave each grandchild $10,000 each. GIFTS TO GRANDCHILDREN in 2019 Mel made the following gifts to his grandchildren during 2019: Seeing how Mel's mom outlived her assets, Mel is afraid his grandchildren may have the same fate. To assist them with their retirement income, Mel decided to establish a trust for the grandchildren. The trust is an irrevocable trust and he funded it in the current year with $950,000. The trust will accumulate income until each grandchild reaches age 50. When a grandchild reaches age 50, he/she will begin receiving an annuity for their life. When all of the grandchildren die, if there is any remaining assets then the trustee may distribute those assets to a charitable organization of his choosing. Mel sent a check in the amount of $18,000 directly to William's private school to pay her tuition. Mel also gave each grandchild $10,000 each. Assume Mel paid gift tax of $3,820,000 in 2017 for taxable gifts in the amount of $15,000,000 made in 2016. These were his first taxable gifts. MEL'S STATEMENT OF FINANCIAL POSITION AS OF 12/31/22 (AFTER THE GIFT TO OKSANA) ASSETS LIABILITIES AND NET WORTH Liabilities Cash & Cash Equivalents Cash $982,466.00 Primary Residence $1,350,000.00 Total Cash/Cash Equiv. $982,466.00 AMEX Black $480.250.00 Total Current Liabilities $1,830,250.00 Invested Assets Braveheart $1,863,100.00 Investment Portfolio $11,322,875.00 Qualified Plan $9,494,010.00 Total Investments $22,679,985.00 Personal Use Assets Net Worth $33,890,926.00 $8,745,625.00 $1,823,200.00 Primary Residence Vacation Property Auto 1 $164,250.00 Yacht $1,325,650.00 Total Personal Use $12,058,725.00 Total Assets $35,721,176.00 Total Liabilities and Net Worth $35,721,176.00 Notes to Financial Statements: 1. Assets are stated at fair market value (rounded to even dollars). 2. Liabilities are stated at principal only (rounded to even dollars). 3. Braveheart was valued last week for insurance purposes. The valuation includes $1,000,000 for the land and $850,000 for the business. 4. The qualified plan has Robyn listed as the designated beneficiary. The Investment Portfolio is a Transfer on Death (TOD) account with Hanna and Christian as the listed beneficiaries. 5. The adjusted basis of the primary residence is $4,000,000. 6. Mel received the vacation property as an inter vivos gift from his grandfather, Otto. Otto purchased the vacation property for $10,000 and the FMV of the property at the date of transfer to Mel was $30,000. The FMV when Otto died was $90,000. The annual exclusion did not apply to the transfer and the gift tax paid was $15,400. 7. The yacht is owned joint tenancy with rights of survivorship with Robyn. They each contributed 50% of the purchase price. The Statement of Financial Position only reflects Mel's interest. 8. Mel's state does not have any statutes that invalidate bequests or beneficiary designations to prior spouses. 9. This statement is prepared after all the gifts were made, including the one to Oksana, and the gift tax has been paid for the 2015 gifts. 2. Assuming Mel died December 31, 2022, calculate his gross estate. For full credit, identify each asset and its value. (Value - 10 points) 3. Assuming Mel died December 31, 2022, calculate his probate estate. For full credit, identify each asset and its value. (Value - 10 points) 4. Assuming Mel died December 31, 2022, calculate the Marital Deduction available for estate transfers to Oksana. (Value - 10 points) 5. Assume Mel died December 31, 2022. For this question only, assume that the estate tax liability due is $10,605,111, and Hanna is appointed executor. Unfortunately, Hanna forgot to file an Estate Tax Return (Form 706) and pay the estate tax due until 38 days after the return's due date. How much is the total penalty for failure-to-file and failure-to-pay? (Note this is not the actual estate tax liability due.) (Value -10 points) 6. What is the amount of Mel's total taxable gifts for 2018 and 2019 (less the annual exclusion and qualified transfers)? (Value - 10 points) 7. Calculate Mel's gift tax due for 2018 and 2019. Show your work. Even if the tax due is zero, show your calculation to earn full credit. (Value - 10 points)

Answer rating: 100% (QA)

Answer The spot rate represents the interest rate an investor would expect to receive if they bought ... View the full answer