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Estate & Gift Taxation
Terms in this set (28)
List the steps involved in calculating gift tax:
1. Determine current taxable gifts;
2.Add previous taxable gifts and calculate total gift tax;
3. Reduce total gift tax by previous gift taxes paid;
4. Reduce remaining gift tax by unused portion of unified credit
a transfer of property for less than adequate consideration
gift tax trigger
a transfer without adequate consideration during the life of the donor
What is the limit on charitable contribution gift deductions?
- unlimited, allowed for gifts to charitable organizations
When is a gift tax return required and when is it due?
-Due April 15 for gifts made in prior year;
-Required when gifts exceed annual exclusion or are gifts of future interest
Who is liable for transfer taxes?
donor or estate primarily liable; donee or heir secondarily liable
List the requirements for the complete transfer of a gift:
-Gift delivered to donee;
-Donor must give up control of the property;
-Donee must accept the gift
What is the annual exclusion from gift tax?
-Applied per donee per year;
-Only applies to gift of present interest
What is the unified credit?
Allows a minimum cumulative amount of tax-free transfers for the estate tax
What deductions from transfer taxes are allowed?
-Unlimited marital deduction;
-Unlimited charitable contribution deduction
Describe the gift-splitting election on a tax return:
A gift is split and treated as being given by both spouses;
Both spouses can use an annual exclusion for gifts of present interests
List the type of transfers that are not considered gift:
-Payment of another individual's medical or educational expenses (tuition and fees only) if paid directly to education or medical provider;
-Satisfaction of an obligation
What qualifies as a marital gift deduction?
-Allowed for most gifts to spouse;
-Unlimited in amount;
-Gifts of "terminable interests" do not qualify
the right to income or to enjoy property currently
When are estate tax returns required and when are they due?
-Required when gross estate plus adjusted taxable gifts equals or exceeds the exemption equivalent;
-Due 9 months after date of death.
List the contributions under which life insurance proceeds are included in gross estate:
-Decedent had incidents of ownership;
-Decedent's estate or executor is the beneficiary of the insurance policy
What types of transfers must be included in gross estate if they are made within 3 years of death?
-Transfers with retained interests;
-Transfers of life insurance
-Property owned by the decedent at the date of death;
-Property "transferred" by the decedent at death
What are the requirements for a property to be classified as a qualified terminable interest property (QTIP)?
-Spouse must receive all income annually or more often;
-Property must be included in spouse's estate
What properties are specifically included in gross estate?
-Life insurance proceeds under certain conditions;
-Property transferred where the decedent retained an interest or a power;
-Certain gifts within three years of death
adjusted taxable gifts
taxable gifts other than gifts already included in the gross estate
In estate planning, what is the alternative valuation date?
- Valuation date is six months after the date of a person's death. For estate tax purposes, the executor may place a value on the estate as of the date of death or on the alternate valuation date. To use the alternative valuation date, the estate value and tax must be less than on the date of death
A legal entity that comes into existence automatically at the death of a taxpayer (the "decedent")
What are the requirements for a marital deductions transfers?
-Only to citizen spouses;
-Property the spouse receives outright and for which he/she can control its ultimate destination;
-Qualified terminable interest property
What is meant by "generation skipping tax?"-
Triggered by the transfer of property to someone more than one generation younger than decedent. This tax is not applicable when intervening descendants are deceased
What is the gross estate property valuation?
FMV at the date of death or the alternate valuation date
List the 4 steps in calculating estate tax:
-Taxable estate increased by adjusted taxable gifts;
-Apply tax rates to total transfers;
-Reduce tentative transfer tax by gift taxes paid;
-Subtract the unified credit
List the types of other estate tax deductions:
-Debts of the estate;
-Casualty and theft losses;
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