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Regulation - Estate

Estate & Trust

QuestionAnswer
Unified transfer tax system Gift(while alive), Estate(upon death), GST; same tax rates, exclusions and credit
Gift Tax Formula GI-50%spouse-(13K)-tuition&medical(unlim.)-Charitable(unlim.)-Marital deduction(unlim.) + PYtaxable gifts=total*tax-PYtaxable-credit(345K)=GiftTaxLiab.
Future vs. Present Interest Only gifts of PRESENT interest are excludable (immediate use, possession or enjoyment). FUTURE interest (reversions, reminders, future benefit) not deductible.
Sec.2503(c )trust minors<21, allows parents annual exclusion(13K)b4age21, to qualify may pay income, must pass to beneficiary when age 21
Crummey trust more flex than 2503(c ), beneficiary can be any age, terminate anytime. To cal - beneficiary must have power to demand disturb of <13K, or annual pro-rata
Educational/Medical/Political/Charitable exclusion unlimited
Estate Tax must file if exceeds 3.5M, basis is FMV at death or alt value date(6mos),
Estate Tax Formula Gross Estate at FMV - funeral exp. - admin exp. - debts&mrtgs-charit.contrib(unlit.)-marital deed. (unlit.) + gifts = transfer tax - tax credit (1.4558M)=tax liab.
Estate&Trust filings Estate - 9mos after death or calendar(gift tax also), Form 709, income >$600, AMT exemption is $22.5K, must make est. pmnts (not gift return). Gifts to unrelated beneficiaries in excess of 13K must file Form 1041.
Simple Trust all income is distributed, no charitable contr., no corpus distrib., income taxable to beneficiaries (not trust) even if no distribution in CY, multiple beneficiaries prorate DNI retains char.
Complex Trust trustee may pay or accumulate income, allows charit. contrib., allows corpus disturb Taxed 2-tier 1)required distributions even out of corpus 2)all other (corpus disturbs. not taxable)
Estate or Trust exemptions estate $600, Simple Trust $300, Complex trust $100
Non Deductible Expenses of estate&trust expenses of tax exempt income, medical/funeral expenses (deducted on final 1040), no NOL carryovers from 1040final
DNI same as estate trust formula, but +personal exemption+capital loss deduction (lim.3K)+tax exempt int. - net CG allocable to corpus - extraordinary div. & taxable stock divs allocable to simple trust corpus
Grantor Trust grantor retains control and pays tax on income, revocable, must own >5%
Tax Positions - reasonable standard, realistic possibility, substantial authority, MLTN reasonable stnd (success>20%), realistic (success>30%), substantial authority (success>40%), MLTN >50%
Preparer Responsibility estimates OK, in good faith - not verify OK, reasonable basis unless tax shelter, sign, provide copy to TP, records 3yrs maint., no disclosure without subpoena
Created by: baurjan on 2011-11-05



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