StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

Stevens gift tax liability for 2013 - Assignment Example

Cite this document
Summary
Steven’s gift tax liability amounts to $10,000; however, this amount is offset by the lifetime gift exemption (Hoffman, Raabe and James 847). In this case, Steven is not subject to any gift taxes in 2013, but reduces his lifetime gift exemption by $10,000…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER98.5% of users find it useful
Stevens gift tax liability for 2013
Read Text Preview

Extract of sample "Stevens gift tax liability for 2013"

Question Part Steven’s gift tax liability for Gifts given: Fur Coat to Allie = $10,000 (less than annual exclusion of $14,000) Car to Bobby = $18,000 = 18000 – 14000 = $4,000 (taxable) Cash to Carla = $20,000 = 20000 – 14000 = $6,000 (taxable) Total gift tax liability = 6000 + 4000 = $10,000 Lifetime gift tax exemption = $5,250,000 Less gift tax due = 5250000 – 10000 = $5,240,000 Steven’s gift tax liability amounts to $10,000; however, this amount is offset by the lifetime gift exemption (Hoffman, Raabe and James 847).

In this case, Steven is not subject to any gift taxes in 2013, but reduces his lifetime gift exemption by $10,000. Part 2: Advice on how Steven could have minimized his gift tax for 2013 The gifts made to Bobby and Carla both accrued gift tax liability. Since Allie’s gift was valued less than $14,000, it did not accrue any taxes. Carla and Bobby’s gifts accrued a tax liability of $10,000. On a personal opinion, Steven could have minimized or eliminated this gift tax liability by considering, giving the gift as joint property with his wife.

The IRS considers gifts given by couples jointly, to be divided into half of the total value of the gift, such that each individual ends up giving half (Herisgad). From this point, each half is dealt with individually, subject to gift tax guidelines. If Steven, had given the car to Bobby jointly with his wife then it would have been total value $18,000 divided by two from each thus from Father $9,000 and Mother $9,000 of which both amounts do not reach the annual exclusion of $14,000 or $28,000 if put together.

Same with Carla, the $20,000 gift if given jointly it will be subject to a $28,000 exclusion thus not tax liability. Part 3: The basis of any property that you believe Steven gifted Steven gifted his son Bobby with a car that was worth $18,000. This is considered a taxable gift following reasons. First, Steven did not give it to his spouse. Second, he did not contribute the car to a political organization or for charity use. Third, it was not used to fund tuition or medical expenses and lastly it surpassed the year exclusion limit thus making it liable for gift tax (IRS).

Part 4: The gifts made in 2014 if any. In addition, if Steven dies within three years of the creation of the trust, are there any estate tax consequences to Steven’s estate. In 2014 Steven did not make any taxable gifts, this is because he did not give out any item or cash that exceeded the yearly exclusion of $14,000 nor did he give out any item without expecting goods or services, thus no gifts were made. If Steven dies within the first three years after setting up the trust, the following tax consequences will apply.

The estate tax will take effect on his death and income tax will be deducted on any income that will be earned by the trust. Further, there will be no transfer taxes upon distribution of trust income and corpus (Hoffman, Raabe and James 882). Part 5: With regard to Steven’s gift tax audit, does Steven have any defenses to protect himself against the audit? Yes, Steven does have the defense to protect himself against the audit. Steven’s gift records indicate he has documented all his gift transfers except for the help he offered his brother.

Steven can justify his actions by declaring that his contributions to his brother’s welfare were charitable. Steven can also defend himself on the overvaluation of the fur coat and undervaluation of the car gift to Bobby. To offer him further assistance, I would request for written records of his contribution to his brother’s welfare. In addition, Steven will also need to present the income records of the trust he created. Question 2 On the first decision, Kanye should not make money transfer to soon to be wife, rather my recommendation would be for him to wait until they are married after which he will be able to transfer the money without any tax consequences.

In their current situation, Kanye is not legally married to Kim therefore; any gift transferred between them is subject to being taxed. The IRS only exempts gift tax for legally married couples (Plante Moran Trust 4). Kanye’s decision on creating an irrevocable trust for his daughter is a great idea, since this has a positive impact in terms of tax consequences. With the irrevocable trust, Kanye reduces his taxable estate hence providing assets to his daughter without being subject to taxable estate in case of death (Helsell Fatterman).

I would recommend he continue with the plan. The third decision on life insurance may cause unfavorable tax consequences for his beneficiaries. If the life insurance is left in the name of his estate, his beneficiaries may experience difficult after his death since the insurance will only be available once the probate process is finished which is a time consuming and costly process (Hoffman, Raabe and James 878). I would recommend he rather name direct beneficiaries of the life insurance rather than his estate.

In this case, the beneficiaries will benefit from the insurance immediately after his death. The fourth decision on joint tenancy has adverse effects on both estate tax consequences and gift tax consequences. The first consequence is on estate tax, whereby if couples hold joint tenancy, then they are will not be able to maintain both federal tax exemptions. Second, if the joint tenancy is terminated, it will result in a taxable gift if the proceeds from sale are not equally distributed (Samson).

My recommendation would be for Kanye, to maintain the home as family home with his descendants as beneficiaries. The last decision to contribute after death annuity to a trust for a private foundation charity, will result in a federal gift tax deduction in accordance to section 2522 (Hoffman, Raabe and James 874). References Helsell Fatterman. Irrevocable Trusts. 2013. Web. 19 December 2013. Herisgad, Sally. Gift Tax: Do I have to pay gift tax when someone gives me money? 10 November 2013. Web.

23 December 2013. Hoffman, William, et al. Corporations, partnerships, estates and trusts. Mason, OH.: South-Western Cengage Learning, 2013. Text. IRS. Eight Tips to Determine if your Gift is Taxable. 30 March 2012. Web. 22 December 2013. Plante Moran Trust. "Guide to Federal Estate and Trust Tax Return Requirements." n.d. PMTrust. Document. 20 December 2013. Samson, Steven. Holding Property in Joint Tenancy Creates more Problems than it Solves. 2011. Web. 19 December 2013.

Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Stevens gift tax liability for 2013 Assignment Example | Topics and Well Written Essays - 750 words”, n.d.)
Stevens gift tax liability for 2013 Assignment Example | Topics and Well Written Essays - 750 words. Retrieved from https://studentshare.org/finance-accounting/1498665-stevens-gift-tax-liability-for-2013
(Stevens Gift Tax Liability for 2013 Assignment Example | Topics and Well Written Essays - 750 Words)
Stevens Gift Tax Liability for 2013 Assignment Example | Topics and Well Written Essays - 750 Words. https://studentshare.org/finance-accounting/1498665-stevens-gift-tax-liability-for-2013.
“Stevens Gift Tax Liability for 2013 Assignment Example | Topics and Well Written Essays - 750 Words”, n.d. https://studentshare.org/finance-accounting/1498665-stevens-gift-tax-liability-for-2013.
  • Cited: 0 times

CHECK THESE SAMPLES OF Stevens gift tax liability for 2013

Government Policies to Promote Inclusion in the UK

[Type the company name] TO WHAT EXTENT ARE EMPLOYMENT INCLUSION POLICEIS TOWARDS PEOPLE WITH MENTAL HEALTH ISSUES EFFECTIVE IN UK [Type the document subtitle] YOUR Name [Pick the date] This projects attempts to use a summative and interrogative approach to examine existing research and establish the effectiveness of back-to-work programs targeting people with facing mental health issues in the United Kingdom....
34 Pages (8500 words) Essay

Service Operation Management: Retail and Food Industry

This report is written to address some of the key issues faced by a service operations manager while attempting to introduce a new service.... The company in question, Al's Store is a local partnership concern between two brothers catering to a suburban community.... nbsp;… Service Operation Manager will focus on excelling in the quality, reliability and response time of the new service....
11 Pages (2750 words) Term Paper

English Equity and Trust Law

English Equity and Trust Law Name: University: Course: Tutor: Date: As Helmholz1 says, there are various issues with regard to Intestate Estate especially within the English common and property law.... Trust law is especially important with regard to how a court makes a decision in a case involving disputed Intestate Estate, considering the facts of trust2....
10 Pages (2500 words) Essay

Radio Technology Improvements

The paper "Radio Technology" tells us about the industrial revolution.... The origin, history, diffusion, and development of radio are as fascinating as the gadget itself.... Radio technology is a result of scores of diverse breakthroughs and developments in the technological industry.... hellip; The primary account of radio as a means of communication is the history of technology which did generate radio device that utilizes radio waves....
8 Pages (2000 words) Essay

Associated and Joint Venture

Therefore, a joint venture may be a corporation, limited liability Company, partnership or other legal structure, depending on a number of considerations such as tax and tort liability.... This paper investigates the viability of Associates and Joint Venture as standard financial consolidation for accounting....
15 Pages (3750 words) Essay

Salomon vs Salomon & Co Ltd

nbsp;The final element established was the widely famous advantages of limited liability enjoyed by shareholders, limited only to the unpaid amount of their shares.... The study "Salomon vs Salomon & Co Ltd" reminds us about the existence of such a fundamental principle: to uphold the course of justice, and if to do so require that an exception be made to it, then it should be, and indeed it is strong enough to be overlooked yet still be an applicable decision....
9 Pages (2250 words) Case Study

The Challenges Faced by the Family Business

This paper is majorly going to look at the family business.... This paper also covers some of the challenges faced by the family business which majorly comes from the family its self.... Furthermore, these challenges may also come from key stakeholders like the employees.... nbsp;… The circle of ownership may include the members of the family, employee's owners, and investors....
10 Pages (2500 words) Research Paper

Principles of Aerodynamics

The author of this paper "Principles of Aerodynamics" underlines that the distinct area of flow being developed around the airfoil is actually the generation of a shock wave.... Reportedly, as the Mach number increases, the separation between the airfoil and the fluid flow increases.... hellip; The flow becomes turbulent in the layers adjacent to the airfoil....
8 Pages (2000 words) Coursework
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us