To avoid probate, Art is contemplating the transfer of his bond portfolio to an irrevocable trust. He will retain the right to the income from the trust for a specified term of years, after which the principal is to be distributed to his grandchildren. Which of the following statements correctly describe the tax implications of the intrafamily transfer to a grantor retained income trust (GRIT) that Art is considering? Regardless of when Art dies, the total value of the trust at the time of his death will be included in his gross estate. Art is entitled to a gift tax annual exclusion for the present value of the interest that he irrevocably transferred to his grandchildren. For purposes of calculating the gift tax value, Art's retained income interest has a value of zero; therefore, he will have gift tax liability based on the total value of the assets transferred into trust. All income earned by the trust is taxable to Art each year.
To avoid probate, Art is contemplating the transfer of his bond portfolio to an irrevocable trust. He will retain the right to the income from the trust for a specified term of years, after which the principal is to be distributed to his grandchildren. Which of the following statements correctly describe the tax implications of the intrafamily transfer to a grantor retained income trust (GRIT) that Art is considering? Regardless of when Art dies, the total value of the trust at the time of his death will be included in his gross estate. Art is entitled to a gift tax annual exclusion for the present value of the interest that he irrevocably transferred to his grandchildren. For purposes of calculating the gift tax value, Art's retained income interest has a value of zero; therefore, he will have gift tax liability based on the total value of the assets transferred into trust. All income earned by the trust is taxable to Art each year.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question #24 of 85
Question ID: 1251785
To avoid probate, Art is contemplating the transfer of his bond portfolio to an irrevocable trust. He will retain the right to the income from the trust for a specified term of years, after which the principal is to be distributed to his grandchildren.
Which of the following statements correctly describe the tax implications of the intrafamily transfer to a grantor retained income trust (GRIT) that Art is considering?
- Regardless of when Art dies, the total value of the trust at the time of his death will be included in his gross estate.
- Art is entitled to a gift tax annual exclusion for the present value of the interest that he irrevocably transferred to his grandchildren.
- For purposes of calculating the gift tax value, Art's retained income interest has a value of zero; therefore, he will have gift tax liability based on the total value of the assets transferred into trust.
- All income earned by the trust is taxable to Art each year.
A)
I and II
B)
I and III
C)
III and IV
D)
III only
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