Gift Tax

In: Business and Management

Submitted By kimmyfeng
Words 1600
Pages 7
Homework 3 LEI FENG(Kimmy)
Problem3
(1) Two years ago, Decedent gave Child $750,000 in cash. Decedent dies in the current year. (a) What is included in Decedent’s gross estate?
Decedent made a transfer within 3 years of death. Under Section 2035(a), nothing is included in Decedent’s gross estate, because it’s a cash gift. However, under Section 2035(b), the amount of the gross estate shall be increased by the amount of any tax paid on any gift made by the decedent during the 3-year period ending on the date of the decedent’s death. So the amount of gift tax of this gift the decedent paid is included in his gross estate. (b) What is the result in question (1)(a), above, if Decedent gave Child a life insurance policy on Decedent’s life worth $100,000, with a face value of $750,000, instead of cash?
$750,000 is included in D’s gross estate, because the under section 2035(a)(1), the transfer was made within 3 years of the decedent’s death, and under 2035(a)(2), the value of such property would have been included in the decedent’s gross estate under section 2042. (c) What is the result in question (1)(b), above, if, after the gift, Child made annual premium payments totaling $30,000? Assume that Decedent’s total pre-gift premium payments were $120,000.
D purchased $120,000 on insurance out of $150,000. Any improvements made by donee are not included in the gross estate. (12/15) * $750,000 = $600,000 is included in the estate under Section 2042 so included under Section 2035(a). (d) What is the result in (1)(b), above, if, during the time between the gift and Decedent’s death, the insurance policy paid dividends to Child totaling $10,000.
Just the face value of the life insurance policy $750,000 is included in D’s gross estate. $10,000 of dividends payment is not included in D’s gross estate,…...

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