Your client has made previous lifetime gifts that have fully exhausted his applicable credit amount. He has asked you to advise him about the tax consequences of transferring his closely held business, valued at $350,000, to his daughter in exchange for a series of fixed single life annuity payments having a present value of $300,000. You should inform him that the most important tax implication of this intrafamily business transfer is that A)if he has received less than $300,000 from his daughter before he dies, he will have to include the present value of the difference in his gross estate.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
icon
Related questions
Question

Your client has made previous lifetime gifts that have fully exhausted his applicable credit amount. He has asked you to advise him about the tax consequences of transferring his closely held business, valued at $350,000, to his daughter in exchange for a series of fixed single life annuity payments having a present value of $300,000.

You should inform him that the most important tax implication of this intrafamily business transfer is that

A)if he has received less than $300,000 from his daughter before he dies, he will have to include the present value of the difference in his gross estate.
 
 
B)he will be making a taxable gift of $50,000 because the value of the transferred business exceeds the present value of the expected annuity payments.
 
 
C)he will be making a taxable gift of $350,000 because the Chapter 14 rules require his retained interest to be valued at zero.
 
 
D)he will have to include $50,000 minus one annual exclusion in adjusted taxable gifts in his estate tax calculation as an adjusted taxable gift.
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps

Blurred answer
Similar questions
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education