LO.1 Barry creates a trust with property valued at $7 million. Under the terms of the trust instrument, Michelle (age 48) receives a life estate, while Terry (age 24) receives the remainder interest. In the month the trust is created, the interest rate is 4.4%. Determine the value of Barry’s gifts. (Jr. 19-35-19-36) LO.4 Jacob gives stock (basis of $900,000 and fair market value of $2.2 million) to Mandy. As a result of the transfer in 2013, Jacob paid a gift tax of $90,000. Determine Mandy’s gain or loss if she later sells the stock for $2.3 million. (Jr. 19-36) LO.5 Bill and Ellen are husband and wife with five married children and eight grandchildren. Commencing in December 2013, they would like to transfer a tract of land (worth $1,008,000) equally to their children (including spouses) and grandchildren as quickly as possible without making a taxable gift. What do you suggest? (Jr. 19-37) LO.6 Last year Christian sold a tract of land (basis of $1 million) to Kate (an unrelated party) for $4 million, with a cash down payment of $1 million and notes for the balance. The notes carry a 7.5% rate of interest and mature annually at $1 million each over three years. (Christian did not elect out of the installment method.) Before any of the notes mature and when they have a fair market value of $2.8 million, Christian gives them to Grace. LO.8 In each of the following independent situations, what bypass (exclusion) amount is available to Ava’s estate when she dies in 2013? Assume that any appropriate procedures are followed, and that elections are made to transfer to Ava any DSUE amount of Al, her deceased husband.
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