Question

60. Which of the following statements is or are false?

I. Louise, who died in 2016, was survived by her husband, Luis. Louise and Luis husband owned their home as tenants in common. The fair market value of the home on the date of Louise's death was $750,000. Louise provided all of the consideration for the purchase. The entire value of the property (on the date of Louise's death, or the alternate valuation date, whichever is applicable) is includible in Louise's gross estate for federal estate tax purposes.

II. Two brothers, Jeff and David, purchased a vacation home in 1982, as joint tenants with right of survivorship. Jeff contributed $40,000 toward the purchase price and David contributed $60,000. They have records of their contributions. In 2016, when the property was worth $200,000, Jeff died. With respect to the vacation home, $100,000 is includible in Jeff's gross estate for federal estate tax purposes.

III. By the terms of his will, John left his entire estate in trust. The terms of the trust provided that all trust income was to be paid to his wife (who survived him) for her life in at least annual installments. The terms of the trust also gave the trustee discretionary authority to distribute trust principal to his disabled daughter (who survived him) for her support. The trust meets the requirements of a qualified terminable interest property trust (QTIP Trust).

a. I only is false.

b. II only is false.

c. III only is false.

d. I and II are false.

e. I, II, and III are false.

Answer 1

Solution 60

In case 1 –The   Louise and Luis had equally owned their own. After Luis's death, the portion of property belonging to Luis’s would have been transferred to Louise without any taxation. Now with Louise's death, she was the sole owner of the property and as there is no surviving spouse hence it would be 100% included in gross estates for tax purposes. Correct me if my understanding of the relationship and series on events is not correct.

In case 2 - Jeff had 40% ownership in the property hence only $80,000 should be included in gross estate calculation.

Case 3 - the facts given meets the definition of QTIP trust.

This is the option b.