Following are some transactions that have been considered from the standpoint of
ID: 2450767 • Letter: F
Question
Following are some transactions that have been considered from the standpoint of their estate tax significance upon the death of the transferor. To what extent, if at all, do they constitute transfers subject to gift tax at the time of the transfer?
A) Near D’s death, which, as anticipated, occurred one year later, D gave an insurance policy on D’s life to Child C.
B) D transferred securities to a trust, retaining the right to the income for D’s life and providing for payment of the corpus at D’s death to unrelated X or X’s estate.
C) D transferred securities to a trust under the terms of which the income was to be paid to unrelated X for X’s life. Upon X’s death, the corpus was to be returned to D if D was living, and, if not, it was to be paid over to unrelated Y or Y’s estate.
D) D transferred securities to a trust under the terms of which the income was to be paid to S for S’s life. Upon S’s death, the remainder was to go to X or X’s estate. However, D retained an unlimited right to alter the terms of the trust in any manner.
Explanation / Answer
(a) Insurance policy is a gift and therfore it would be subject to gift tax.Estate Tax 2035(b) include gift tax paid , apply 2035(a) .gift tax and estate tax is not double tax , you deduct gift tax payable . Only used to increase marginal rate
(b) Transfer of securties to trust is allowwed - 2511(a). GT can be had on less than one's entire interest in property being passed under GT - 25 .2511-1 (h)(7),only remainder is subject to gift tax. However if entire corpus would be subject to GT if 2702 is applied
(c) If D's Rv cannot be valued than entire amount is treated as trandferred.Donor's burden to find valuation - 25.2511- (e) . Gift tax is applied on the entire value of the property subject to the gift if the retained interest of donor is not measurement suspectible of the basis of generllay accepted valuation principles
(d) No gift , it is not treated as transfer as D still maintains control and dominion 25- 2511-2(b)