Subchapter Case Study

Hoffman, W., Maloney, D., Raabe, W., & Young, J. (2013). Federal Taxation Comprehensive Volume. (36 ed.). Ohio: South-W

ANSWER: An estate held in tenancy by the entirety is limited to “homestead” property held by a husband and wife “during coverture.”

to be taxed to pay the retirement income of elders (Halstead and Lind 79). Now in the

The trust was to terminate at the end of five years, at which time the accrued but unpaid income was to be paid to the taxpayer’s wife, and the principal returned to taxpayer. The United States Supreme Court ruled in Helvering v. Clifford that the income earned by the trust would be taxable to the grantor, even though the income was actually distributed to the beneficiary, because of the amount of control retained by the grantor.

Once a gain or loss is recognized, a taxpayer must determine how the recognized gain or loss affects the taxpayer’s tax liability. The character depends on a combination of two factors: purpose or use of the asset and holding period. The purpose or use of the asset is important because the law does not treat all assets equally. The general use categories are: (1) trade or business, (2) for the production of income (rental activities), (3) investment, and (4) personal. Based on these criteria, we can categorize an asset into one of three groups: (1) ordinary, (2) capital, or (3) section 1231. Characterizing the gain or loss is important because all gains and losses are not equal. Ordinary gains and losses are taxed at ordinary income rates, regardless of the holding

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.

Further complicating that tax scenario is what his heirs will owe in federal estate taxes. Attorneys said that estate taxes can be as high as 40% and will depend on Wilson's final arrangements.

Sadly, this isn't the case, as every estate goes through the process, as it must be determined who gets his or her assets. Debts must be paid, assets distributed and the final wishes of the deceased respected, when possible. There are laws governing the process, and they tend to be complex.

The third estate had to pay the highest rate of taxes, while the first and second estates had to pay little or no taxes (document 2). The first estate enjoyed enormous wealth and privilege, owned about ten percent of the land, collected tithes, and paid no taxes. The second estate owned land, but had little money income. The third estate resented privileges of the first two estates and were burdened by taxes.

§ 36(c) of the Internal Revenue Code. At the same time, the Tax Court does not execute the law based on its plain language.

* Estate Tax: combine with taxable gifts; to derive taxable estate, you are entitled to subtract contributions to spouse & charity. Only eligible for exemption if not used for gift tax purposes.

Jane’s handcrafted jewelry would likely be classified as a business. The reason this is true is because to be classified as a business one must engage in the activity with the motive of turning a profit. (Doggett v. Burrett, 3 ustc ¶1090, 12 AFTR 505, 65 F.2d 192 (CA-D.C., 1933)

That's our first level. Dealing with the trusts and the estates is-- I think it overwhelms CPAs. Some of them speak this language, some of them don't, they just handle individual and sometimes corporate returns. But you get into these 241s, it's a whole different world.

I.R.C. § 2056(d)(1). Congress has provided an exception to this general rule in the form of a qualified domestic trust (QDOT), which allows the property to qualify for the marital deduction if the trust meets certain requirements. I.R.C. § 2056(d)(2)(A). For a trust to qualify for QDOT status and the marital deduction, it must meet the seven requirements contained in the tax code and accompanying treasury regulations. I will separately discuss each requirement below and whether the currently language of Form M effectively fulfills that requirement.

Simkovic, Michael. (Fall 2015). The Knowledge Tax. The University of Chicago Law Review. Vol. 82.4. 1981-2043.