In the current year, Emily, a widow, engages in the following transactions. Dete
ID: 2385760 • Letter: I
Question
In the current year, Emily, a widow, engages in the following transactions. Determine the amount of the completed gift, if any, arising from each of the following occurrences. (show work please)
1.
a. Emily names Lauren the beneficiary of a $100,000 life insurance policy on Emily's life. The beneficiary designation is not irrevocable.
b. Emily deposits $50,000 into a checking account in the joint names of herself and Matt, who deposits nothing to the account. Later that year, Matt withdraws $15,000 from the account.
c. Emily pays $22,000 of nephew Noah's medical expenses directly to County Hospital.
d. Emily transfers the title to land calues at $60,000 to OLive.
2. Refer to the facts above and assume the current year is 2011. Emily prior gifts are as follows:
Year: 1974 Amount of taxable gifts: $500,000
Year: 1998 Amount of taxable gifts: $1,000,000
What is the gift tax liability with respect to Emily's 2011 gifts?
Explanation / Answer
a) Not a completed gift as the life insurance policy beneficiary can revoked by Emily, a s the beneficiary designation is not irrevocable. (b) It is a completed gift as MATT has not contributed anything to bank account and has also withdrawn 15000 from the account (c) It is a completed gift, as the expenses of someone else i.e Noah is being borne by Emily (d) It is a compeleted gift as now the owner of the land is Olive.. Amount of Gift = 15000 + 22000 + 60000 = $ 97000 answer However there will be no gift tax liability as the total lifetime gift tax exemption is still not exhausted. Total lifetime gift tax exemption is 5,000,000 Total for Emily till date = 5,00,000 + 1,000,000 + 97,000 = 15,97,000 which is below the exempt limit of 5,000,000