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 lump sum payment of $300,000. You should inform him that the most important tax implication of this intrafamily business transfer is that A) he will be making a taxable gift of $50,000, because the value of the transferred business exceeds the lump sum payment of $300,000. B) he will be making a taxable gift of $350,000, because the Chapter 14 rules require his retained interest to be valued at zero. C) 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. D) none of the above.
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 lump sum payment of $300,000. You should inform him that the most important tax implication of this intrafamily business transfer is that A) he will be making a taxable gift of $50,000, because the value of the transferred business exceeds the lump sum payment of $300,000. B) he will be making a taxable gift of $350,000, because the Chapter 14 rules require his retained interest to be valued at zero. C) 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. D) none of the above.
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
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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 lump sum payment of $300,000.
You should inform him that the most important tax implication of this intrafamily business transfer is that
A)
he will be making a taxable gift of $50,000, because the value of the transferred business exceeds the lump sum payment of $300,000.
B)
he will be making a taxable gift of $350,000, because the Chapter 14 rules require his retained interest to be valued at zero.
C)
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.
D)
none of the above.
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