Ch 27 Flashcards
Chapter definitions for South-Western Federal Taxation 2015: Comprehensive, 38th Edition
Alternate valuation date
Property passing from a decedent by death may be valued for estate tax purposes as of the date of death or the alternate valuation date. The alternate valuation date is six months after the date of death or the date the property is disposed of by the estate, whichever comes first. To use the alternate valuation date, the executor or administrator of the estate must make an affirmative election. Election of the alternate valuation date is not available unless it decreases the amount of the gross estate and reduces the estate tax liability.
Annual exclusion
In computing the taxable gifts for the year, each donor excludes the first $14,000 of a gift to each donee. Usually, the annual exclusion is not available for gifts of future interests. ? 2503(b). See also gift splitting.
Bypass amount
The amount that can be transferred by gift or death free of any unified transfer tax. For 2014, the by-pass amount is $5.34 million for estate tax and $5.34 million for gift tax. See also exemption equivalent amount.
Deceased spouse’s unused exclusion (DSUE)
An amount that can be transferred to a surviving spouse.
Disclaimers
Rejections, refusals, or renunciations of claims, powers, or property. Section 2518 sets forth the conditions required to avoid gift tax consequences as the result of a disclaimer.
Exclusion amount
The value of assets that is exempt from transfer tax, due to the credit allowed for gifts or transfers by death. For gifts and deaths in 2014, the exclusion amount is $5.34 million. An exclusion amount unused by a deceased spouse may be used by the surviving spouse. Often called the exemption equivalent amount.
Exemption equivalent
The nontaxable amount (in 2014, $5.34 million for gift tax and estate tax) that is the equivalent of the unified transfer tax credit allowed.
Future interest
An interest that will come into being at some future time. Distinguished from a present interest, which already exists. Assume that Dora transfers securities to a newly created trust. Under the terms of the trust instrument, income from the securities is to be paid each year to Nan for her life, with the securities passing to Steve upon Nan’s death. Nan has a present interest in the trust since she is entitled to current income distributions. Steve has a future interest since he must wait for Nan’s death to benefit from the trust. The annual exclusion of $14,000 (in 2014) is not allowed for a gift of a future interest. ? 2503(b).
Gross estate
The property owned or previously transferred by a decedent that is subject to the Federal estate tax. Distinguished from the probate estate, which is property actually subject to administration by the administrator or executor of an estate. ?? 20312046. See also adjusted gross estate and taxable estate.
Joint tenants
Two or more persons having undivided ownership of property with the right of survivorship. Right of survivorship gives the surviving owner full ownership of the property. Suppose Betty and Cheryl are joint tenants of a tract of land. Upon Betty’s death, Cheryl becomes the sole owner of the property. For the estate tax consequences upon the death of a joint tenant, see ? 2040. See also tenants by the entirety and tenants in common.
Marital deduction
A deduction allowed against the taxable estate or taxable gifts upon the transfer of property from one spouse to another.
Probate estate
The property of a decedent that is subject to administration by the executor or administrator of an estate. See also administration.
Qualified terminable interest property (QTIP)
Generally, the marital deduction (for gift and estate tax purposes) is not available if the interest transferred will terminate upon the death of the transferee spouse and pass to someone else. Thus, if Hannah places property in trust, life estate to Will, and remainder to their children upon Will’s death, this is a terminable interest that will not provide Hannah (or her estate) with a marital deduction. If, however, the transfer in trust is treated as qualified terminable interest property (the QTIP election is made), the terminable interest restriction is waived and the marital deduction becomes available. In exchange for this deduction, the surviving spouse’s gross estate must include the value of the QTIP election assets, even though he or she has no control over the ultimate disposition of the asset. Terminable interest property qualifies for this election if the donee (or heir) is the only beneficiary of the asset during his or her lifetime and receives income distributions relative to the property at least annually. For gifts, the donor spouse is the one who makes the QTIP election. As to property transferred by death, the executor of the estate of the deceased spouse makes the election. ?? 2056(b)(7) and 2523(f).
Taxable estate
The gross estate of a decedent reduced by the deductions allowed by ?? 20532057 (e.g., administration expenses and marital and charitable deductions). The taxable estate is subject to the unified transfer tax at death. See also adjusted taxable estate and gross estate. ? 2051.
Taxable gift
Amount of a gift that is subject to the unified transfer tax. Thus, a taxable gift has been adjusted by the annual exclusion and other appropriate deductions (e.g., marital and charitable). ? 2503.
