Tait married well. His wife comes from a very wealthy family with extensive investments and financial entanglements.
Question:
Tait married well. His wife comes from a very wealthy family with extensive investments and financial entanglements. Unfortunately his wife died on March 12, 2021, leaving Tait with the responsibility of filing her estate tax return. He has already determined that the estate is required to file a return. As he digs through her financial affairs, Tait discovers a number of important details. Using what you learned in this class and applying the details of Lectures 37, 38, 39, indicate how each of the items should be treated on the estate tax return Tait will file for his wife's estate, Form 706 (possible answers might be: exclude, include partially as an asset, include fully as an asset, include partially as a deduction, include fully as a deduction, etc.). Note: No calculations are expected.
Required:
(i) His wife and her two brothers owned 40 acres of land near Eden, Utah. The three of them were listed as joint tenant owners. Both brothers outlived Tait's wife. The value of the land is $3,000,000.
(ii) His wife's father had formed an Irrevocable Life Insurance Trust to serve as the owner of a multi million dollar life insurance policy on the father's life. When the father died in 2018, the proceeds of the insurance policy were collected and continued to be held inside the Life Insurance Trust. Tait's wife was the sole beneficiary of the Irrevocable Life Insurance Trust, but was entitled to distributions from the Trust only when approved by the Trustees. Tait's only child is listed in the Trust document as the alternate beneficiary after the death of Tait's wife.
(iii) Tait's wife purchased a life insurance policy on Tait's life. His wife was initially the owner of the policy. However, after she became ill, Tait's wife transferred ownership of the policy to one of her brothers 10 days before she died, with the intent that no portion of the policy would be included in her taxable estate.
(iv) Also after she became ill, exactly 10 days prior to her death, Tait's wife transferred her interest in a family business to their only child, retaining no continuing access, control or strings over the gifted asset.
(v) Tait and his wife owned their personal residence as joint tenant owners. Following the wife's death, Tait became the sole owner.
(vi) Tait's wife had a substantial investment portfolio which she held throughout her lifetime and which passed to their only child immediately following the wife's death.
(vii) Tait and his wife formed a standard A/B Trust and transferred into the Trust their $400,000 motorhome. The Trust provides that upon the wife's death all of the benefits immediately pass to Tait, and upon Tait's death, all of the benefits immediately pass to their only child. Because neither of them were comfortable with how their child might mature as she grows older, both Tait and his wife retained the right to amend the trust at anytime. Two years prior to her death, his wife signed a document relinquishing her power to amend this trust.
(viii) Upon the death of his wife's father, the wife was named as the beneficiary of a trust which owned a large portion of her father's estate. Although the wife had no ability to make an immediate withdrawal of the assets from the trust, she was given a Power of Appointment to name who should inherit her share of her father's trust upon her death. She named her only child to receive those benefits.
(ix)Tait discovers the estate will owe estate taxes as a result of his wife's death to the State of California in the amount of $300,000.
(x) Tait's wife's Will makes a charitable gift to Primary Children's Hospital in the amount of $400,000.
(xi) Tait's wife's Will gives ½ of her entire estate to Tait.
(xii) Tait's wife's Will gives the remaining ½ of her entire estate to her only daughter.
(xiii) Tait incurred expenses of $39,000 in hiring an attorney and an appraiser to help prepare the estate tax return.
(xiv) Tait acquired a marble headstone to place near his wife's burial site.
(xv) Tait's wife made taxable gifts (in excess of $15,000 per donor, per donee,per year) in years prior to 2021.
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill