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Tax of estates, trusts & gifts

1. Why can the unified transfer tax be categorized as an excise tax? In this regard, how does it differ from an income tax?

2. 10.3 As to the alternate valuation date of §2032, comment on the following.
a. The justification for the election.
b. A Form 706 need not be filed for the estate.
c. The main heir prefers the date of death value.
d. An estate asset is distributed to an heir three months after the decedent's death.
e. Some estate assets have appreciated in value since the death of the decedent,
f. Effect of the election on income tax basis.
g. Treatment of income accruing from the property from the date of death to the alternate valuation date.

3. The alternate valuation date of § 2032 can be used just to increase the income tax basis of property the heirs receive."
a. How could such a result occur?
b. Is such a result possible? Why or why not?

4. Distinguish between the following.
a. The gross estate and the taxable estate.
b. The taxable estate and the tax base.
e. The gross estate and the probate estate.

5. With regard to "life insurance," comment on the following.
a. What the term includes (i.e., types of policies).
b. The meaning of "incidents of ownership."
c. When a gift occurs upon maturity of the policy.
d. The tax consequences when the owner of policy predeceases the insured and the beneficiary.
e. The tax consequences when the beneficiary of the policy predeceases the insured.

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Question 1
First, an excise tax is levied on the production of goods for sale within the country. Second, a unified transfer tax is levied on the transfer of properties through inheritance, will or gift. Third, an income tax is levied on an individual's earnings. Hence, in this regard the unified transfer tax is categorized as an excise tax because the property transferred is not considered an income of the recipient rather the transfer is akin to sale in that the transferor did not receive any monetary consideration, but some other considerations valuable to him or her only.

Question 2A
The election must decrease (1) the value of the gross estate, and (2) the sum of the tax imposed by this chapter and the tax imposed by chapter 13 with respect to property includible in the decedent's gross estate (reduced by credits allowable against such taxes).

Question 2B
Form 706 is used to report dispositions or cessations of qualified use under section ...

Solution Summary

Tax of estate, trusts and gifts are examined.