Chapter 6: Estate Tax Flashcards
Alternate Valuation Date
An alternate date, other than the date of death, to value a decedents gross estate. The alternate valuation date is either six months after the date of death, or if the asset is disposed of within six months of the date of death, the assets disposition date. Wasting assets do not qualify to use the alternative valuation date.
Adjusted Gross Estate
The adjusted gross estate is equal to the gross estate less any deductions for funeral expenses, last medical expenses, administration expenses, and losses during the administration of the estate.
Blockage Discount
A reduction in the fair market value of a large block of publicly-traded stock because the transfer of a large block of stock is less marketable than other transfers of smaller amounts of stock.
Date of Declaration
The date a board of directors approves and declares a divided to be paid to its shareholders.
Date of Record
The date that a divided paying company determines the owners of its stock who are entitled to a divided (regardless of whether or not the individual owns the stock as of the payment date).
Estate Tax Liability
The amount equal to the tentative tax less any applicable credits available to a decedents estate.
Gross Estate
The gross estate consists of the fair market value of all of a decedents interests owned at the decedents date of death plus the fair market value of certain property interests the decedent transferred during his life, in which he retained some rights, powers, use, or possession.
Income in Respect of Decedent (IRD) Assets
Assets that, as a result of income deferral, have built in income that must be recognized by the beneficiary of the asset
Key Person Discount
A reduction in the fair market value of transferred stock due to an economic reality that the value of the stock will decline if a key person, such as the founder, dies or becomes disabled.
Lack of Marketability Discount
A reduction in the fair market value of a transferred asset because the interest is more difficult to sell to the public.
Minority Discount
A reduction in the fair market value of a transferred interest in property because the interest is not a controlling interest.
Portability
The ability of the executor of an estate to timely file Form 706 to transfer the decedents unused credit exclusion to the surviving spouse.
Power of Appointment
The power to name who will enjoy or own property
Reversionary interest
Interests that have been transferred and subsequently revert back to the transferor. Also, includes a possibility that the property transferred by the decedent may return to him or his estate and a possibility that property transferred by the decedent may become subject to a power of disposition by him.
Straight Single Life Annuity
An annuity for a term equal to the annuitants life.
Survivorship Annuity
An annuity that provides payments to one person, and the provides payments to a second person upon the death of the first.
Taxable Estate
The adjusted gross estate less the available unlimited marital and unlimited charitable deduction.
Tentative Tax
The estate tax calculated on the tentative tax base.
Tentative Tax Base
The tentative tax base equals the taxable estate plus all post-1976 taxable gifts.
X Dividend Date
The date the market price of a stock adjusts for a declared dividend (i.e., the market price of the stock is reduced approximately by the amount of the dividend)
Property owned by the Decedent (§2033)
Cash Stocks and bonds Retirement accounts Notes receivable Personal residence Other real estate Household goods Automobiles Business interests Life insurance on someone elses life Collectible (art, wine, jewelry) Vested future rights Outstanding loans due from others Income tax refunds owed to the decedent Patents/copyrights Pain and suffering award Damages owned to the decedent Dividends declared and payable Income in respect of decedent (wages receivable) Any other tangible personal property
Dower and Curtesy Interest (§ 2034)
Requires that a surviving spouse receive a statutory share of their deceased spouses estate.
The curtesy right is a husbands right to receive a life estate, at his wife’s death, in the land she owned in fee simple if the couple had at least one child.
The dower right was traditionally a wife’s right to a life estate in one third of the land her husband owned in fee simple at his death.
– Dower rights later evolved to be more consistent with curtesy rights be giving the wife a life estate in all property owned at death, not just one third.
Gifts Made within Three Years of Death (§2035)
Look back provision that requires the value of certain lifetime transactions to be included in a decedents gross estate.
ALWAYS INCLUDED: any gift tax paid in gifts made within 3 years of decedents date of death
SOMETIMES INCLUDED: the value of of any property gifted within 3 years of the decedents date of death
• Transfers with a retained life estate
• Transfers taking effect at death
• Revocable transfers
ALWAYS INCLUDED: the transfer of a life insurance policy within 3 years of death
Transfers with Retained Interest (§2036)
Includes the value of any interest in property transferred by the decedent, in which he retained some interest in the property during his life.
A transferred interest is treated as having been retained if there was an understanding, expressed or implied, that the interest or right would later be conferred.
1 interest retained for life 2 interest retained for a period only ascertainable by death 3 retained interest held at death
