Truste Estate SIM Flashcards
trust estate SIM
Present gift , Future Gift, or Not complete gift?
Cobb created a $500,000 trust that provided his mother with an income interest for her life and the remainder interest to go to his sister at the death of his mother. Cobb expressly retained the power to revoke both the income interest and the remainder interest at any time.
Income at the trusts creation?
Remainder Interest at the trusts creation?
Income at the trusts creation?
Not complete - If you can revoke a trust ( grantor trust) then niter beneficiary nor remainder beneficiary have a complete gift
Remainder Interest at the trusts creation?
Not complete
Present gift , Future Gift, or Not complete gift?
Kane created a $100,000 trust that provided her nephew with the income interest until he reached forty-five years of age. When the trust was created, Kane’s s nephew was twenty-five. The income distribution is to start when Kane’s nephew is twenty-nine. After Kane’s nephew reaches the age of forty-five, the remainder interest is to go Kane’s niece.
Income Interest?
Future Interest - he wont get the benefits till 4 years after creation of trust
Present gift , Future Gift, or Not complete gift?
During Year 1, Hall, an unmarried taxpayer, made a $10,000 cash gift to his son in May and a further $12,000 cash gift to him in August.
Present intest - get the benefit now - immediate benefit
Present gift , Future Gift, or Not complete gift?
During Year 1, Yeats transferred property worth $20,000 to a trust with the income to be paid to her twenty-two-year-old niece, Jane. After Jane reaches the age of thirty, the remainder interest is to be distributed to Yeats’ brother. The income interest is valued at $9,700 and the remainder interest at $10,300.
Income Interest - present Interest
Remainder Interest - Future interest
Present gift , Future Gift, or Not complete gift?
Tom and Ann Curry, U.S. citizens, were married for the entire Year 1 calendar year. Tom gave a $40,000 cash gift to his uncle, Grant. The Currys made no other gifts to Grant in Year 1. Tom and Ann each signed a timely election stating that each made one-half of the $40,000 gift.
Present Interest - immediate benefit to beneficiary
If they both sign then they split the gift so 30 and the rest (10) is taxable
Present gift , Future Gift, or Not complete gift?
Murry created a $1,000,000 trust that provided his brother with an income interest for ten years, after which the remainder interest passes to Murry’s sister. Murry retained the power to revoke the remainder interest at any time. The income interest was valued at $600,000.
Income Interest - present interest - no provision making this revokable
Remainder Interest - Not complete - because they can revoke it at any time - it is not a complete gift
Present gift , Future Gift, or Not complete gift?
Determine whether the transfer is subject to the generation skipping tax, the gift tax, or both taxes. Disregard the use of any exclusions and the unified credit.
Martin’s daughter, Kim, has one child, Dale. During Year 1, Martin made an outright $6,000,000 gift to Dale.
Both gift tax and generation skipping tax
Gain/Loss?
Sold 200 shares of Y Corp. stock at $14 per share. Green received the 200 shares as a gift from his brother, three years ago, at the time that the shares had a fair market value of $10 per share. Green’s brother purchased the stock for $16 per share.
O
200 Y shares received as a gift – When stock that has been received as a gift has a lower value at the date of the gift than the donor’s basis, the donor’s basis will be used to calculate gains and the value at the date of the gift will be used to recognize losses. When the sales price falls between the donor’s basis and the fair value on the date of the gift, there is no gain or loss. The 200 shares of Y stock were sold for $14 per share. The donor’s basis was higher, at $16, indicating there was no gain. The value on the date of the gift was $10, indicating that there was no loss. As a result, no gain or loss will be recognized and the amount to be reported will be $0.
Gain/Loss?
Sold 200 shares of Y Corp. stock at $22 per share. Green received the 200 shares as a gift from his brother, three years ago, at the time that the shares had a fair market value of $26 per share. Green’s brother purchased the stock for $16 per share.
1200
2nd sale of 200 Y shares received as a gift – When stock that has been received as a gift has appreciated in value the donor’s cost and date basis carry over to the donee. Since the stock had been purchased at $16 per share by Green’s brother and was sold for $22 per share, the difference of $6 per share, or 200 x $6 or $1,200, would be the gain to be reported.
Gain/Loss?
Sold 450 shares of Z Corp. stock at $40 per share. Green received the 450 shares from his aunt’s estate as a bequest. The fair market value of the stock at the date of his aunt’s death was $32 per share and did not change in the subsequent year. His aunt originally purchased the stock for $20 per share.
3600
450 shares of inherited Z stock – when stock is inherited, the basis to the recipient is the fair value at the date of death or, if elected, six months after the date of death. Since the shares did not change in value, Green’s basis would be the $32 at the date of death. A sale at $40 per share will result in a gain of $8 per share on 450 shares or 450 x $8 = $3,600.
Gain/Loss?
Sold 1,225 shares of ABC Corp. stock at $9 per share. Green purchased 600 shares several years ago at $30 per share. Three years ago, when the stock price was $21, there was a 2-for-1 stock split and two years ago, when the stock price was $25, there was a 3-for-2 stock split. No other shares were sold by Green prior to year 2.
-1225
Sale of ABC shares – Since the original shares purchased by Green had a basis of $30 per share, the 2 for 1 stock split would have given Green twice as many shares at the same cost, reducing the basis to $15 per share on 1,200 shares. The subsequent 3 for 2 stock split resulted in Green turning in 2 shares, with a basis of $15 each, or $30 in total, for 3 shares. Since they would also have a total basis of $30, each of the 3 shares would have a basis of $10. A sale of 1,225 shares at $9 per share will result in a loss of $1 per share or a loss of $1,225 in total.
Gain/Loss?
Sold 500 shares of XYZ Corp. stock at $20 per share. Green purchased these shares two years prior at $22 per share. Three weeks subsequent to the sale, Green purchased 100 shares of XYZ stock at $18 per share.
-800
Sale of XYZ stock – When stock is sold at a loss and repurchased within 30 days of the sale, it is considered a wash sale and the loss is not deductible but is, instead, treated as an adjustment to the taxpayer’s basis in the stock. Since Green sold 500 shares of XYZ stock at a loss of $2 per share, based on the difference between the sales price of $20 and the purchase price of $22, there is a total loss of $1,000. Green, however, repurchased 100 shares within the 30 day period and, as a result, only the loss on the other 400 shares will be deductible. The amount will be 400 x $2 or a loss of $800.
Gain/Loss? Sold 1,600 shares of BX Corp. stock at $4 per share. Green received these shares as a gift from his sister four years ago. The fair market value of the shares at the date of the gift was $7 per share. Green’s sister inherited this stock from her stepmother’s estate. At the date of her death, seven years ago, the fair market value of this stock was $3 per share. The stepmother purchased this stock for $1 per share 10 years prior to her death.
1600
Sale of BX stock – When Green’s sister inherited the stock from her stepmother, the basis would have been the fair value at the date of death or, if elected, six months after death. Presumably, the sister’s basis would therefore be $3 per share. When Green received it as a gift, it had appreciated to $7 per share and Green would retain the sister’s basis of $3. A sale of 1,600 shares at $4 per share would result in a gain for the difference of $1 per share or a total of $1,600.
Gain/Loss? Sold 2,000 shares of TWX Corp. stock at $8 per share. Green received 4,000 shares of TWX in a tax-free transaction for 2,000 shares of WTX Corp. stock he purchased in the prior year for $2 per share.
14000
Sale of TWX stock – Since Green purchased 2,000 shares of WTX for $2 per share, or $4,000 in total, which were converted into 4,000 shares of TWX in a tax-free transaction, Green’s basis in the TWX shares would be $4,000 in total or $1 per share. A sale of 2,000 shares at $8 per share will result in a gain of $7 per share or 2,000 x $7 = $14,000 in total.
