AC 561 Unit 3 Homework Exercises NEW

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Kalpan University AC 561 Unit 3
Homework Exercises NEW
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com. LO.1 Barry creates a trust with property
valued at 7 million. Under the terms of the
trust instrument, Michelle (age 48) receives a
life estate, while Terry (age 24) receives the
remainder interest. In the month the trust is
created, the interest rate is 4.4. Determine the
value of Barry's gifts. (Jr. 19-35-19-36) LO.4
Jacob gives stock (basis of 900,000 and fair
market value of 2.2 million) to Mandy. As a
result of the transfer in 2013, Jacob paid a gift
tax of 90,000. Determine Mandy's gain or loss if
she later sells the stock for 2.3 million. (Jr.
19-36)
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LO.5 Bill and Ellen are husband and wife with
five married children and eight grandchildren.
Commencing in December 2013, they would like to
transfer a tract of land (worth 1,008,000)
equally to their children (including spouses) and
grandchildren as quickly as possible without
making a taxable gift. What do you suggest? (Jr.
19-37) LO.6 Last year Christian sold a tract of
land (basis of 1 million) to Kate (an unrelated
party) for 4 million, with a cash down payment
of 1 million and notes for the balance. The
notes carry a 7.5 rate of interest and mature
annually at 1 million each over three years.
(Christian did not elect out of the installment
method.) Before any of the notes mature and when
they have a fair market value of 2.8 million,
Christian gives them to Grace. LO.8 In each of
the following independent situations, what bypass
(exclusion) amount is available to Ava's estate
when she dies in 2013? Assume that any appropriate
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procedures are followed, and that elections are
made to transfer to Ava any DSUE amount of Al,
her deceased husband.