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Estate and Gift Tax
Terms in this set (115)
SECTION 1: FEDERAL TRANSFER TAXES
What is a federal transfer tax?
imposed upon certain transfers taking effect during a taxpayer's lifetime and at death. There is no longer an Indiana counterpart to these taxes.
2 separate and distinct federal transfer taxes
1. the gift and estate tax (combined system of tax) and
2. the generation-skipping transfer (GST) tax
When is each tax triggered?
1. Gift tax: when a taxpayer makes a gift
2. Estate tax: upon taxpayer's death
3. GST: when a transfer is made to the taxpayer's grandchildren and others either during the taxpayer's lifetime or at the taxpayer's death.
*GST in in addition to gift and estate tax
Unified Transfer Tax System and Gift Taxes
1. What is taxed under a unified transfer tax system?
2. A _____ applies to gift (lifetime) transfers and estate (death) transfers for these tax purposes
3. Accumulates _____ each year, and includes _____ in the _____ calculation made at death.
4. The tax rate schedule ranges from ____ for ____ to ____ for ___.
In effect, we have what?
1. lifetime transfers by either gift or death
2. a single tax rate schedule
3. taxable gifts made; those accumulated gifts; estate calculation. *Because accumulated gifts are added into the estate tax calculation, gift tax paid during life is a credit against estate tax computed at death
4. 18% for taxable transfers up to $10,000, to 40% for taxable transfers over $1 million
a flat tax rate of 40% because the tax only applies to transfers above the lifetime exemption and at that point is a flat 40% on transfers above the exclusion amount.
How to compute the Applicable Exclusion Amount or exemption
Computed on a cumulative lifetime and death transfers and each taxpayer is entitled to a credit against the tax historically known as the "unified credit" (applicable credit amount). This credit is applied against the taxpayer's gift or estate tax liability for cumulative transfers during life and at death.
The credit offsets an amount of cumulative transfers (lifetime or at death) equal to $5.45 million per person (2016).
Current federal estate tax rates: estate and gift tax
$2,125,800: applicable exclusion amount at $5,450,000 applied to the estate and gift tax rate table. Tax rates on transfers above this amount is a flat 40%.
Current federal estate tax rates: GST
$5.45 million. Equal to the highest estate tax rate and thus is a flat 40% for 2016 for cumulative generation-skipping transfers above the exemption amount
Annual Gift Tax Exclusion (2016)
gifts per person: $14,000
joint gifts by spouses: $28,000
SECTION 2: FEDERAL GIFT TAXES
A taxable gift must be
complete and irrevocable
Federal gift tax is computed by
Who is responsible for paying
Using the value of the gifted property as of the date of the gift
The transfer of an interest in property by an individual (Donor) to another person (Donee)
Donor is responsible for paying federal gift tax
Special rules regarding taxable gifts
1. gifts made under POA
2. gifts by check
3. gifts of stock
4. joint interests
5. gifts in trust
6. indirect gifts
Power of Attorney
Complete only if attorney-in-fact has authority to make gift under state law
IC 30-5-5-9(a)(1): Complete if permitted under POA document
Attorney-in-fact can only make gifts to themselves of no more than the current federal gift tax annual exclusion ($14,000)
But, if circumstances warrant more than that for good tax planning, the probate court can approve greater amounts
Gifts by Check
Complete upon the earlier of
-the date the donor no longer has any control over the
-the date the donee deposits or cashes the check
Gifts of Stock
Will be complete on the date the donor delivers the endorsed stock certificate or stock power document to the donee
If delivered to corporation (as opposed to donee), the gift is not complete until stock certificate is re-issued in donee's name
Joint Interests- Real Estate
Real estate transferred as
1. Tenants in common (to 2 people):
2. Joint tenancy with rights of survivorship (to 2 people):
50% of tenant-in-common interest
50% of total value of property but entire property will be included in donor's estate under section 2040
Joint Interests- Bank Accounts
1. John deposits funds in a bank account and then puts Peter on the account as a joint tenant
1. No gift until Peter withdraws funds from the bank account
Because John has contributed 100% of the funds and none of them become Peter's property until withdrawn. Also the result under Indiana's multi-party bank account statute (and state law property rights generally apply for purposes of federal transfer taxes)
Gifts in Trust
May or may not be complete
Review trust document or arrangement
Did the donors give up all of their rights or control to trust property?
What rights did the donor keep?
Rights retained by donor which make a gift not complete are right to:
-amend trust document or
-alter amount beneficiary receives from trust
1. Interest-free and below-market loans:
2. Powers of Appointment
Interest free and below market loans
-Loan made at a low interest rate can result in a gift by the lender to the borrower
-The taxable gift is the difference between the amount of interest that would have been payable under rates set by the IRS and the interest actually paid
Powers of Appointment
-A power of appointment is simply the power to decide who will receive trust or estate property, in what amount, under what conditions
-Gifts occur when the person possessing the power (the "holder") exercises (or releases- i.e. fails to exercise) the power in the favor of the third party
See outline for difference between two types of appointment
-Electing not to receive a gift
-A disclaimer will not trigger a fed gift tax
A "qualified disclaimer" must:
-be in writing
-made within 9 months from the date the gift vested
Person disclaiming it can't control where it goes
Gift Tax Annual Exclusion
$14,000 per donee per year; $28,000 if husband and wife agree to "split the gift"
In order to qualify for annual exclusion, the gift must be a gift of "present interest"
What is a present interest?
An unrestricted right to the immediate use, possession or enjoyment of the property, or of the income from the property
In contrast, a future interest is typically a gift made in trust
A gift of future interest will not qualify for the gift tax exclusion
Present Interest Exceptions
1. Gifts to Minors: will qualify for the annual exclusion if gift meets the requirement of IC 2503(c).
In order to qualify, use:
Indiana Uniform Transfers to Minors Act; or
Trust Arrangement (known as a "minors" trust)
2. Section 529 Plans:
College savings plan; can front load 5 years ($70,000), but have to file gift tax return each year to show to IRS
529A plans for the Disabled: not available in IN yet. Federally authorized in 2015.
Gift Tax: Educational and Medical
IRC Section 253(e) provides a gift tax exclusion for "qualified transfers"
"Qualified Transfers": amounts paid by a donor on behalf of another person for such person's tuition, training, or medical care.
Qualified Transfers exclusion is in addition to annual exclusion
Facts could say: "Grandpa gave daughter 50k to pay tuition for grandchild"-would NOT qualify. payments have to be paid directly to institution for ed or med.
Gift Tax: Transfer Incident to Divorce
Excluded from Federal gift tax
Spouses must have entered into a written separation agreement and divorce occurs within a 3 year period
Payment of Child Support is not considered a gift for gift tax purposes
Difference between education/medical gifts and deductions
1. don't have to report to IRS, just leave sit off
2. do have to report
Gift Tax Deductions
-Charitable gifts under IRC Section 2522
-Gifts to spouses under IRC Section 2523
-Spouses must be married to each other
-Spouse making the gift must be US citizen or permanent resident
-Donee must be US citizen
-For a noncitizen spouse, gift tax marital deduction is limited to $148,000 for 2016 and is inflation-adjusted
Allows one spouse to treat his or her gifts to any person as made by 1/2 each spouse
Mom gifts stock valued at $28,000
If split gift, mom and dad will be treated as each gifting 1/2 or $14,000 (the 2016 annual exclusion amount)
(see rules in outline- will both have to file a gift return and subtract 1/2; sign each other's; sign their own)
Basis of Gifts to Donee
Basis of property received by gift cannot actually be determined until the time of sale by donee
(see 5 examples in powerpoint)
Basis of Gifts to Donee- holding period
holding period of donor carries over to donee. Even if donee held only one day, and donor had held over one year, donee's gain or loss will be long term, as if donee had held over one year. If donor held one year or less, donee is considered to have acquired on the same date as donor. (see example on slide)
In order to determine basis, need to know
-Fair Market Value at the time of the gift
-Any gift tax paid at the time of the gift
-Donee's sale price
Calculation of Gift Tax
Federal gift tax is computed by using the fair market property as of the date of the gift
"Fair market value" is defined as the price at which the property would change hands between a willing buyer and a willing seller
Federal Estate Tax- what is it?
-Federal estate tax is imposed on the decedent's transfer of his or her estate upon death
-The tax is assessed on the fair market value of decedent's estate valued at date of death
Filing Requirements for gift tax
-Form 709, United States Gift (and Generation Skipping) Tax Return
-Generally, only need to file a return if gifts exceed exclusions and deductions- that is- if you have a "taxable" gift
-No return for gifts between spouses
-No return for gifts under $14,000 (annual exclusion)
-No return for gifts to charity unless otherwise required
-Do not have to put political, educational, or medical on the gift return
-Due April 15 of the year following the calendar year in which gifts are made
Statute of Limitations
The IRS has three years to assess additional gift tax
The SOL period begins to run on the filling date or the due date whichever is later
Statute of Limitations Exceptions
if 25% or more of the total amount of gifts is not reported on return, the SOL period is extended to six years
By agreement with IRS
If no tax return is filed, if the return is false or fraudulent, the IRS may assess gift tax at any time
GIFT TAX EXAM TIPS (1)
1. Identify if a transfer has taken place
Has someone given up property or a property right to another party?
Has consideration been given for the transfer?
No-- then it is likely a gift
GIFT TAX EXAM TIPS (2)
2. Describe the specifics of the gift
Is it a transfer outright from one party to another?
Is it a transfer to a trust?
Is it a transfer of an interest to the property such as joint tenant with the right of survivorship?
Has someone given up property or a property right to another party?
GIFT TAX EXAM TIPS (3)
3. Identify the parties to the gift
Who is the donor- the party giving away the property?
Who is the donee- the party receiving the property?
GIFT TAX EXAM TIPS (4)
4. Is it a taxable gift?
Is the gift complete?
Is the gift irrevocable?
A gift which is both complete and irrevocable is a taxable gift for federal gift tax purposes
GIFT TAX EXAM TIPS (5)
5. If it is a taxable gift
Is it a gift of present interest?
If yes, the gift will qualify for the annual gift tax exclusion of $14,000
Is it a gift of a future interest?
If no, then no annual exclusion
GIFT EXAM TIPS (6)
6. Who is donee?
Is the donee the donor's spouse?
Unlimited Marital Deduction
Is the donee a charity?
Unlimited Charitable Deduction
Is donee a noncitizen spouse?
GIFT EXAM TIP (7): simplified calculation
Donor's total gifts during calendar year
(-)less annual exclusions
(-) less marital deduction gifts
(-) less charitable deduction gifts
(+) prior taxable gifts
= taxable gifts
(x) tax rate (18-40%)
(-) applicable credit (shelters $5.45 million for gifts in 2016)
= if over -0- write check to IRS!
Federal estate tax
Imposed on the decedent's transfer of his or her estate upon death
The tax is assessed on the fair market value of decedent's estate valued at date of death
Federal Estate Tax- Calculation
Total Gross Estate
(-)Less Deductions (last expenses, debts, transfers to spouse and/or charity)
= taxable estate
(+) plus accumulated lifetime prior taxable gifts
=adjusted taxable estate
The adjusted taxable estate figure is multiplied by the applicable estate tax rate (18%-40%) (2016)
(-) applicable credit (shelters taxable estates up to $5.45 million + any unused credit from deceased spouse
= estate tax due
(-) gift tax paid during life (claimed as a credit against this tax but cannot be used to create a refund
=amount of estate tax due to IRS- write check to IRS
Portability of Unused Exemption of First Spouse to Die
-Unused applicable exemption of first spouse to die carries over to second spouse
-Limitation is lesser of exemption amount in year of death of predeceased spouse or the unused applicable exclusion of the most recently deceased spouse (for those who have more than one)
-Must timely file estate tax return to make election, even if not otherwise required
Gross Estate includes the following:
Probate property: assets in a decedent's individual name transferred by last will and intestate succession
Non-probate property: assets transferred by joint tenancy or beneficiary designation (such as life insurance and retirement plans)
Federal Estate Tax Deductions
Adjusted value of the gross estate is the gross estate minus:
-secured claims against the estate
-unsecured claims against the estate
final amount is called "the taxable estate"
the taxable estate is further reduced by certain deductions
the marital deduction
the charitable deduction
valuation: when do special rules apply?
1. stocks and bonds, shares of mutual funds
2. interests in a closely held business
3. life insurance policies and
4. present or future interests in, for example, trusts
In order to elect the alternate valuation date, the value of the decedent's gross estate and the amount of the decedent's estate tax must decrease due to the election.
If elect alternate valuation, must value all of the property in the gross estate at the alternate valuation date
Section 2036 Retained Interest
IRC section 2036 includes in the decedent's estate the entire value of property gifted by the decedent if the decedent retained an interest
3 types of retained interests in transferred property are:
1. right to possession (or enjoyment);
2. right to the income or
3. the right to designate the person who may possess or enjoy the property
Section 2037- Transfers taking effect at death
if a decedent transfers property during the decedent's life, the value of the property transferred is includible in the decedent's estate if three conditions are met
1. possession can only be obtained by surviving decedent
2. decedent retained a reversionary interest in transferred property. "Reversionary interest" is generally any right under which property may be returned to decedent
3. value of reversionary interest immediately before death was more than 5% of transferred property
Section 2038- Right to Amend or Revoke
Section 2038 includes entire value of property which a decedent had power to alter, amend, revoke, or terminate the interests in the gross estate
subject to right to amend or revoke (examples)
Power to revoke or terminate a trust
Power to control and manage the corpus of the trust
Power to change beneficiaries
Power to appoint by last will and testament
Power to invade corpus of a trust created by another whose benefit the decedent created a similar trust (reciprocal trust)
Section 2035 Relinquishments
Certain transfers made within three years of death can be brought back into and taxed in an estate
Relinquishment of gifts made with a retained interest
Relinquishment of right of transfer to take effect at death so that it takes effect immediately
Relinquishment of right to amend or revoke
Two other "3 year rules"
1. gifts of a life insurance insuring the life of a decedent
2. gift tax paid on gifts made within three years of death
Section 2039 Retirement Plans
Both qualified and non qualified retirement benefits are included in the decedent's gross estate
Includes value of any annuity payments (to be made) at the time of the decedent's death (or with some adjustments, at the alternate valuation date)
Section 2040 Joint Property
Jointly owned property will be included in the decedent's gross estate to the extent of the value of the decedent's percentage contribution for the acquisition of the property
Between spouses: only one-half will be included
Decedent's gross estate includes
the value of the property which the decedent could have appointed by the general power of appointment
Life Insurance will be included if:
The decedent is the insured and
The decedent had an "incident of ownership" in the policy
If the decedent is not the insured but has an "incident of ownership," the policy will also be included
What is an "incident of ownership"?
Power to change beneficiary of policy
Power to remove cash value of policy
Power to assign or convey policy to 3rd party
Power to pledge policy
Payment of premiums is NOT an incident of ownership
Life insurance 3 year rule
Under section 2035(a)(2), the death proceeds of life insurance on the life of the donor/decedent, given away within 3 years of death, can be brought back into the estate and taxed!
Special use valuation
Election to value certain real property which real property has been used, prior to decedent's death, in a business, (for example in the business of farming) on the basis of this special business use rather than at the real property's fair market value
Maximum reduction value that can be realized from this provision is $1,110,000 and is inflation adjusted
Special use Valuation- Important Terms
"Qualified Heir"- a member of the decedent's family who acquires or acquired an interest in the qualified real property
"Member of family"- the decedent's spouse, children, stepchildren, parents, siblings, and the lineal descendants or spouses of these 5 categories
Special Use Valuation- LUPOPPA
Location- must be located in US
Use- must be used for 5 out of 8 years
Participation- family member must "materially" participate
Ownership- must be owned for 5 out of 8 years
Percentage- 50% or more of estate
Pass- must pass to a family member
Agreement- must sign with the IRS
Deductions from gross estate
1. funeral expenses
2. administrative expenses
3. debts- secured and unsecured
4. casualty and theft losses during administration
5. obligation value at date of death is the deduction, even if not due and payable as of date of death
Ex: Installment Notes Payable
Unlimited Charitable Deduction
IRC section 2055 allows charitable contribution deductions for the value of property transferred to qualified charitable organizations
The estate tax charitable deduction is unlimited
Unlimited Marital Deduction
Qualifying transfers to surviving spouse are deducted from taxable estate
In order to qualify:
-Spouses must be married
-Decedent spouse must be US citizen or resident
-Surviving spouse must be US citizen or else no marital deduction unless property is placed in a special type of trust known as "QDOT" trust (qualified domestic trust)
Marital Deduction (2)
Trust for benefit of noncitizen spouse
Required in order for the transfer to noncitizen spouse to qualify for marital deduction
2. Qualified Terminable Interest (QTIP)
Generally will not qualify for marital deduction
Election can be made to qualify for marital deduction
Creditors against estate tax
1. Section 2012: credit for gift taxes
2. Section 2013: credit for estate tax on prior transfers
3. Section 2014: credit for foreign death taxes
Federal Estate Tax- basis of property to recipient
generally, such property will have a basis to the recipient which is equal to the fair market value of the property at the decedent's date of death (or alternate valuation date)
Referred to as the "stepped-up basis"
2015 New Basis Reporting Requirements
New IRC Sec. 6035
For estate tax returns filed after 7/31/15
Due 30 days after filing
But extended to 2/29/16 for returns due up to 12/31/15
Penalty $100 per statement not filed
Penalty goes up to $250 per return after 12/31/15
Practitioners still figuring this out!
Section 303 Redemption to Pay Tax
For illiquid estates that have a closely-held business
Exceeds 35% of adjusted gross estate
Limited to taxes, administrative expenses
Gain, if any, on redemption is taxed as long-term capital gain and not ordinary dividend
Should not be much gain due to step up in basis
Federal Estate Tax Return
Form 706- United States Estate and Generation-Skipping tax return
Due 9 months from the decedent's date of death
section 6166- installment payment
allows payment of estate (and generation-skipping) tax attributable to a business interest in the estate of a US citizen or resident to be postponed for 5 years after the date the tax otherwise would have been due
After the 5 year period, the tax can be paid in 10 equal installments
Thus, full payment of estate tax may be postponed for up to 15 years
The estate must make the IRC Section 6166 election on a timely filed estate tax return
Section 6161: extension of time for paying tax
estate tax payment may be extended for up to 12 months "where it is shown to the satisfaction of the Secretary that payment of a deficiency upon the date fixed for the payment thereof will result in undue hardship to the taxpayer..."
Section 6163: extension of time for payment of estate tax on value of reversionary or remainder interest in property
may be postponed until 6 months after the termination of the precedent interest or interests in the property, under such regulations as the Secretary may prescribe. The IRS may extend up to three years for "reasonable cause"
Federal Exam Tips (1)
1. What year did the decedent die?
If decedent died in 2016, there could be federal estate tax- subject to applicable exclusion of $5.45 million
Federal Exam Tips (2)
2. List all of the assets in the decedent
What was the decedent's interest in the asset?
What was the date of death value of the asset?
Who was the beneficiary of the asset?
Is the beneficiary the defendant's spouse or charity?
If so, the gift may qualify for the unlimited marital or
Federal Exam Tips (3 and 4)
3. Did the decedent own real estate? Consider if special valuation use would apply
4. Did the TOTAL value of the decedent's taxable estate decrease 6 months after the decedent's date of death? If yes, then consider if alternate valuation would apply.
Federal Exam Tips (5 and 6)
5. Did the decedent make gifts during life?
Were the gifts taxable? If so, need to add the taxable gifts for purposes of calculating federal estate taxes.
6. What type of gifts were made prior to date of death?
Gifts of an interest such as life estate or an interest in a trust? Gift of life insurance? Were there any relinquishments within 3 years of death?
Federal Generation Skipping Taxes
For 2016, each taxpayer is entitled to an applicable (lifetime) exemption of $5,450,000 (adjusted for inflation).
The GST tax rate is equal to the maximum estate and gift tax rate then in effect, multiplied by the inclusion ratio (40%)
Generation-Skipping Tax Exam Tip (1)
1. Is a grandchild the recipient of a gift during donor's lifetime or at death?
If yes, GST may apply.
REMEMBER: GST is in ADDITION to federal estate and gift tax.
Pass through entity (define, and 4 examples)
Pays no tax at entity level.
1. General Partnership
2. Limited Partnership
4. Subchapter S Corporations
Who pays tax on pass through entity income? (2)
1. The partners, or S corp shareholders.
2. Must pay taxes even if DON'T RECEIVE the income.
Subchapter S Corporation requirements (4)
1. No more than 100 shareholders.
2. Shareholders must be individuals.
3. Only one class of stock.
4. All shareholders consent to election.
How are corporations taxed. (2)
1. Corp pays tax on profits.
2. Shareholders pay tax on dividends.
Gain and Loss at Corp formation. (1, 2 & abc)
1. No gain to Corp upon formation/incorporation.
2. No gain or loss to shareholders if:
a. Shareholders contribute property;
b. Shareholders receive stock in exchange; AND
c. Shareholders are in control (80% stock on aggregate).
How are dividends treated? (4)
1. Distribution from earnings and profits = income at capital gains rate, no change in basis of stock.
2. Distribution NOT from earnings and profits = tax free recovery of investment, decreases basis in stock.
3. Distribution NOT from earnings and profits, and exceeds basis in stock = income from sale of capital asset.
4. Complete liquidation of Corp = treated as if Shareholder sold stock back to Corp
Sale of Corporation, method and tax liability
1. Asset acquisition
a. Corporate level tax on asset sale itself; AND
b. Shareholder tax upon subsequent shareholder distribution of proceeds.
2. Stock acquisition (preferred method)
a. Only tax to the shareholders on the sale of stock.
How is the income of a Trust taxed (3)
1. Income distributed to beneficiary = Beneficiary taxed.
2. Income kept by Trust = Trust taxed.
3. BUT if Settlor has strings attached to Trust = Settlor taxed. (EX: Revocable trust).
How is income of a decedent's estate taxed. (3)
1. Income received by decedent before death = Individual Partial year income tax of decedent.
2. Income of a cash basis decedent received after death = Income tax of Estate.
3. Income generated by estate = Income tax of Estate.
Who pays the federal gift or estate tax.
The donor; the one who GIVES the gift.
When is a gift tax imposed, and examples:
Any completed or irrevocable transfer by gift.
1. Transfer for less than full consideration.
2. Bargain sale of property to a family member.
3. Interest free loan to family member (but exception for up to $100,000 btwn individuals.
4. Adding someone to property in joint title.
5. Joint accounts (amount withdrawn by beneficiary).
What is a general power of appointment, and what is the tax consequence? (1, 2 & abc)
1. Full discretionary power over property (such as a trust).
2. Will be subject to gift tax unless:
a. Limited to health, education, support, or maintenance;
b. Cannot exercise without consent of grantor; OR
c. Cannot exercise without consent of another w/ adverse interest.
Annual Exclusion from Gift tax (4)
1. Up to $14,000 per year per donee.
2. Spouses can give up to $28,000 by electing a "split gift"
3. $5.43 million lifetime exemption per donor.
4. NOTE: Use of lifetime exemption decreases Estate exemption of donor's estate.
Gifts to spouse.
1. 100% "marital deduction"
2. But taxable if a terminable interest (ie, To my spouse for life, then to our son).
3. But can use marital deduction on terminable interest if it is "Qualified Terminable Interest Property." (QTIP)
Who pays federal estate tax?
Estate of a decedent who was a resident of the United States and whose GROSS estate exceeds 5.43 million (as adjusted by gift exemption).
NOTE: Estate tax, and Estate income tax are two separate things.
Gross estate vs. Probate estate
Gross estate in much broader, includes some lifetime transfers.
Joint interests in property for Gross estate purposes: (3)
1. Tenancy in Common = proportionate share of property.
2. Joint tenancy or tenancy by the entirety with Spouse = 1/2 of the joint interest.
3. Joint tenancy w/ Non-spouse = full value of property, unless executor can show surviving owner contributed the property.
Are life estates included in Gross estate? (2)
1. Not if life estate based on decedents life.
2. But if Decedent created life estate on own life, remainder interest is included in Gross estate.
What life time transfers will be "swept back in" to Gross estate? (2)
Watch for strings attached.
1. Transfers with retained life interest.
2. Retained power to alter or revoke.
Life insurance that is included in Gross estate. (1, 2 & ab, 3)
1. Policies owned by decedent on life of another.
2. Policies on Life of decedent if:
a. Executor will receive; OR
b. Retained "Incidents of ownership" (right to change beneficiary, cancel policy, cash surrender value; BASICALLY ALL LIFE INSURANCE).
3. Policies transferred with 3 years of death.
Estate Marital Deduction (2)
1. Portion of estate passing to spouse is entitled to 100% deduction
2. Unless terminable interest that is not a QTIP.
Qualified Terminable Interest Property (4)
1. Property passes from decedent to spouse;
2. Spouse entitled to all income from property for life, payable annually or more frequently;
3. No one has power to appoint any part of property to another; AND
4. Executor makes QTIP election on or before filing federal estate tax return.
Estate Tax Exemption Portability
A decedent's spouse, upon timely election, may use any unused portion of the decedents estate exemption (if all property left to spouse, then 100% spouse deduction, and with portability, Spouse can double exemption to $10.86 million).
Deductions from Estate Tax (5)
1. Marital Deduction
2. State Death taxes (none in Indiana)
3. Funeral and Administrative expenses
4. Debts owed at time of death
5. Charitable contributions
Indiana Adjusted Gross Income
Basically the same as Federal AGI with some small changes.
Indiana Income Tax
Flat 3.3% on IAGI for individuals.
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