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REG > R6 - Estate & Gift Transactions > Flashcards

R6 - Estate & Gift Transactions Flashcards

1
Q

General Rule

A

Property Transfer by gift during lifetime or by will at death is taxable to giver, at FMV.

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2
Q

Unified Transfer Tax

A
  • Lifetime gifts

- Transfers at time of death

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3
Q

Lifetime Gifts

A
  • $15,000 gift excluded from tax per year per donee ($30,000 MFJ)
  • Lifetime combined exclusion of $11,580,000 is allowed per individual for gift’s and TP’s Estate. (MFJ can double)
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4
Q

Estate Tax (Form 706)

A
  • Taxed at FMV of property at death
  • Required to be filed if the lifetime exclusion is exceeded
  • Filed within 9 months of decedent’s death. (Birth and Death)
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5
Q

Gross Estate: FMV Property

A

Includes:
1. Value at the date of death
OR
2. Value at Alternate Valuation Date, which is the earlier of date property is distributed or 6mo*.
*If sold within 6 months, Sale Proceeds = Basis, so no gain (loss).
3. FMV of decedent’s share of jointly held property.

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6
Q

Gross Estate: FMV of decedent’s share of jointly held property.

A
  1. Joint with spouse: include 50% of FMV

2. Others not at 50%: include 100% less % of other owner’s ACTUAL contribution. (Not gift to kids).

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7
Q

Gross Estate: All items included

A
  1. FMV property
  2. Insurance proceeds: Include 100% if decedent is beneficiary.
  3. Incomplete gifts
  4. Revocable transfers
  5. All property entitle to be received (items that decedent would have gotten anyway if he/she hadn’t died.) i.e, salary, rental income, pension, etc
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8
Q

Estate Transfer Tax Calc

A 
FMV Assets 
(-) Liabilities
(=) Net Worth (1)
(-) Transfers (Charity & Spouse)
(=) Remainder (2)
(*) Tax Rate (40%)
(=) Estate Tax (3)
(-) Unified Credit ($4,577,800) 
(-) Other Credits (Gift Taxes paid or Foreign death)
(=) Fed Tax Due (4)
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9
Q

Liabilities (Non-discretionary deductions)

A
  1. Medical expenses (optional to deduct in 1040, with appropriate waiver from executor)
  2. Admin expenses (optional to deduct in 1040)
  3. Outstanding debts
  4. Claims against the estate
  5. Funeral Expenses
  6. Indebtness of the property
  7. Certain taxes (tax before death and state death tax)
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10
Q

Transfers (Discretionary deductions)

A

a. Charitable bequests (unlimited)

b. Marital deduction (unlimited)

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11
Q

Admin expenses

A

If deducted in 1040, the admin expenses are items 3-7 of liabilities.

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12
Q

Decedent’s Unused Exclusion

A
  • When spouse dies and doesn’t use all of their unified credit, the surviving spouse can add remainder to their unified credit when it dies.
  • Executor of estate must make a timely election to allow surviving spouse use unused exclusion.
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13
Q

Gift Tax (Form 709)

A
  • Tax paid by person giving the gift
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14
Q

Taxable Gifts

A
  • Every transfer of cash or any kind of property for less than FMV is a gift.
  • Subject to $15,000 exclusion ($30,000 MFJ)
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15
Q

Unlimited Gift Exclusion

A
  • Payments made directly to Educational Institution
  • Payments made directly to Health Care Provided to Medical Care
  • Charitable gifts
  • Spouse gifts
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16
Q

Gift Issues: Present Vs. Future

A
  • Present interest are gifts

- Future interest are not gifts

17
Q

Future Gifts

A
  • Reversions
  • Remainders
  • Trust income where accumulation of income is mandatory (no distributions)
  • Present gifts without RAV
18
Q

Present Gifts

A
  • Cash
  • Trust income where distributions are mandatory
  • Life estates (Interest Free Loans)
  • Estates for a term certain
  • Bonds or notes
  • Unrestricted transfers of life insurance policies
19
Q

Gift Issues: Complete Vs. Incomplete

A
  • Complete is gift.

- Incomplete Gifts are included in estate.

20
Q

Complete Gift

A
  • When donee is unborn but you who who he/she will be.

- Despite the possibility of property going back to donor.

21
Q

Incomplete Gift

A
  • When gifts are conditional or revocable
22
Q

Revocable gift

A
  • When donor reserves right to revoke gift or change beneficiary. Gift is complete when those rights terminate by any reason except donor’s death.
23
Q

Basis of Gifts

A
  • Rollover Basis + Gift Taxes Paid by Donor attributable to property appreciation (pro-rata increase)
24
Q

Taxable Gifts Calc (CY Taxable Gifts)

A

Total amount of gifts - exclusion ($15-$30K) per donee - unlimited exclusions for charity and spouse

25
Q

Cumulative Lifetime Gifts

A

CY Taxable Gifts + PY Taxable gifts

26
Q

Tax due on current gifts

A

Cumulative Lifetime Gifts - Applicable credit

27
Q

Generation Skipping Transfer Tax

A

Applies when individuals transfer property to a person who is two or more generations younger than the donor.

REG (33 decks)

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