Purchase Solution

gift tax

Not what you're looking for?

Ask Custom Question

Please see attached.

This problem is about the gift tax. An important provision is that each person can give $12,000 per year per donee free of gift tax. (It was $10,000 for years before 2002.) Mark & his wife owned all of the units (like shares of stock) in a limited liability company (LLC). Mark is the LLC manager (like president & CEO of a corporation), & the operating agreement (like bylaws of a corporation) allows the manger to determine distributions to the owners if there is LLC income, but losses are anticipated for several years. Also, the LLC members (owners) cannot sell their units or withdraw from the LLC without the managers permission. The manager can be replaced or the operating agreement changed only if 80% of the voting units agree.

Mark & his wife gave hundreds of units to their several children & children's spouses over 4 years, retaining for themselves a little less than 50% ownership. They claim the annual gift exclusion for all of these gifts. Is the annual exclusion allowed for these gifts? Why or why not? What is the court's reasoning? Explain.

Attachments
Purchase this Solution
Solution Summary

This explanation provides you a comprehensive argument relating to gift tax

Solution Preview

Problem and Facts
In a limited liability company, all the shares were owned by one Mark & his wife. This company had tree farming properties and the company was not expected to earn profits for several years. Every year Mark & his wife gifted units (shares) to each of their eight children and their spouses. They did this over a period of 4 years to the extent that they held less than 50% of the shares of the company.
The company had been formed with the intention to provide long term income to the holders of the units (shares). It had been anticipated that for several years this company would not make any profits and would not distribute any income.
For each of the 4 years, Mark & his wife claimed exemption on gift tax that allowed up to $10,000 exemption on gift tax. The company was governed by an Operating Agreement that vested far reaching ...

Solution provided by:
Hatim Baxamusa, MBA
Education
  • BSc , University of Calcutta
  • MBA, Eastern Institute for Integrated Learning in Management
Recent Feedback
  • "I read your comments, and thank you for this feedback. Do I need to find other studies that applied this methodology Ive used? That's where I'm stuck at."
  • "Thank you kindly sir. "
  • "Excellent and well explained. --Thank you kindly. "
  • "Awesome notes. I appreciate you."
  • "I have the follow-up project and I will assign that to you very soon. "
Purchase this Solution
Free BrainMass Quizzes
Team Development Strategies

This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.

Operations Management

This quiz tests a student's knowledge about Operations Management

Cost Concepts: Analyzing Costs in Managerial Accounting

This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.

Basics of corporate finance

These questions will test you on your knowledge of finance.

Marketing Management Philosophies Quiz

A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.

View More Free Quizzes
Related BrainMass Solutions

  • Gift Tax Consequences

    Hence, the gift tax is determined by multiplying the donor's gift tax bracket with the gross amount of the gift, in this case, $30,000 less the amount of gift tax to be paid by David.

  • Strategies to avoid gift tax

    364734 gift tax What is the annual amount that a donor can give to a recipient each year and not have to file a gift tax return? If the donor gives more than this amount, is the donor required to pay a gift tax?

  • What is the annual amount that a donor can give to a recipie

    If the donor gives more than this amount, is the donor required to pay a gift tax? Recommend a tax strategy, other than giving only the annual exclusion amount, to minimize the gift tax.

  • Unified transfer tax rate schedule and gift tax

    588866 Unified transfer tax rate schedule and gift tax What is the Unified Transfer Tax Rate Schedule and how does it compare/contrast to the estate tax rates and/or the gift tax rates?

  • Features common to gift tax formula and the estate tax formula

    485839 Features common to gift tax formula and the estate tax formula 1. Identify the features common to the gift tax formula and the estate tax formula. 2. What is the lifetime gift tax exemption in tax year 2012?

  • Gift Tax, Estate Tax and the Unified Crefitw

    588864 Gift Tax, Estate Tax and the Unified Crefitw Completely answer the following questions Identify the features common to the gift tax formula and the estate tax formula.

  • Description and Reasons for Gift Tax

    588944 Description and Reasons for Gift Tax What is gift tax and why do we have it? Should we have gift tax?

  • Regulations Related to Gift and Estate Tax

    552899 Regulations Related to Gift and Estate Tax Further explain the regulations related to gift and estate tax? This is a very broad topic, so we will cover the basic concepts of gift and estate taxes.

  • Allison's allowable deductions from AGI

    A-The gift tax exclusion includes gift to spouse, and qualified charity and there is a gift allowance of $13,000 for each gift to a person other than on the gift tax exclusion list.

  • Morris Jory's taxable gifts

    It is likely that the IRS and the tax court will classify the transaction as a gift to Amanda and Peter. So, $66,000 would be taxable gift. With an additional taxable gift $24,000 (from $35,000 given to Robin).

View More Related Solutions