Question

In 2011, while he was still living, Leon funded an $7,500,000 irrevocable trust for the benefit of his only daughter. In the event of daughter's death, the trust would benefit her children (Leon's grandchildren). At the time this trust was formed, none of Leon's GST exemption was allocated to this trust. Several years later, Leon's daughter died. Leon was still alive when his daughter died. The value of the trust had increased to $15,000,000. After Daughter's death, the trust remained in place with Leon's grand-daughter as the sole beneficiary. Prior to funding this trust, Leon had never made any taxable gifts of any sort. ____When Leon initially funded this trust, how much GST was due? Remember, no GST exemption was allocated to the trust when it was funded. ____When Leon initially funded this trust, how much Gift Tax was due? ____Assume that, when Leon's daughter died, he took no action(s) with respect to this trust. How much GST is due as a result of the death of Leon's daughter? Assume the year of death is after 2012 (i.e., 2013 law in effect). ____Assume that, when Leon's daughter died, he took no action(s) with respect to this trust. How much Gift Tax is due as a result of the death of Leon's daughter? Assume the year of death is after 2012 (i.e., 2013 law in effect). ____Certain tax consequences resulted from Leon's inaction upon the death of his daughter. Was there any action he could have taken that would have reduced the amount of GST resulting from his daughter's death? ____If Leon had taken timely action when his daughter died, how much GST would have been due? Assume the year of death is after 2012 (i.e., 2013 law in effect). A. $2,000,000 B. Yes, timely action on Leon's part could have eliminated a large part of the GST that resulted from his daughter's death. C. $0 D. $4,000,000 E. $6,000,000 F. No. There was no action that Leon could have taken when his daughter died that would have reduced the resulting GST. G. $875,000 H. None of the other answers is correct

I. Yes, timely action on Leon's part could have completely eliminated the entire GST that resulted from his daughter's death.

Answer 1

When the trust is created , then only that time GST exemptions can be avialed but no GST exemptions was claimed so at the time of irrecovable trust for the benefit of duaghter ,Leon should have file the income tax return if amount exceed $ 52,50,000 in 2013 and more than that amount will be chargeale at 40% .

Now After the death of Leon's daughter, trust amount increased to % 15,000,000 and that will passed to his grandchild after the death of his daughter and that amounts to generation skippin tax that will also chargable at same rate ( as esstate tax ) i.e 40 %

Timely action on Leaons,s part counld have eliminited some part of GST that resulted to daughter,s death.