Gift Tax Essay

1615 Words Nov 30th, 2015 7 Pages
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
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(e) What amount is included in Decedent’s death, Child cashes in the policy and receives $120,000?
Under section 2035(a), $750,000 is included in the decedent’s gross estate. Nothing is changed because child cashed the policy, because under Rev. Ruling 72-282, any increase in value resulting from actions of the donee is not taken into consideration in determining the value of the included interest.
(f) What amount is included in Decedent’s gross estate if Child paid Decedent $100,000 for the policy when the policy was worth $100,000?
Nothing is included in Decedent’s gross income, because under section 2035(d), Subsection (a) and paragraph (1) of subsection (c) shall not apply to any bona fide sale for an adequate and full consideration in money or money’s worth.
(g) What amount is included in Decedent’s gross estate if Child paid Decedent $50,000 for the policy when the policy was worth $100,000.
Because the policy was worth $100,000 but the child only paid $50,000, it is not a sale for an adequate and full consideration in money or money’s worth. Under section 2043(a), there shall be included in the gross estate only the excess of the fair market value at the time of death of the property otherwise to be included on account of such transaction, over the value of the consideration received therefor by the decedent. So $750,000 – 50,000 = $70,000 is included in gross estate.
(2) In year one, Deathly Ill made…

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