Jack and Liz live in a community property state and their vacation home is commu
ID: 2489974 • Letter: J
Question
Jack and Liz live in a community property state and their vacation home is community property. This year they transferred the vacation home to an irrevocable trust that provides their son, Tom, a life estate in the home and the remainder to their daughter, Laura. Under the terms of the trust, Tom has the right to use the vacation home for the duration of his life, and Laura will automatically own the property after Tom's death. At the time of the gift the home was valued at $500,000, Tom was 35 years old, and the 7520 rate was 5.4 percent. What is the amount, if any, of the taxable gifts? Would your answer be different if the home were not community property and Jack and Liz elected to gift-split?Explanation / Answer
Laura's Remainder Worth = ($500000 x 0.14204) = $71020
Tom's Life Estate = $500000 - $71020 = $428980
The gift was made from community property by Jack and Liz. hence we will split the gift them into two equal halves.
Jack & Liz both made a gift of $35510 to Laura and $214490 to Tom each.
Jack & Liz each made a taxable gift of $35510 and $201490 ($214490 - $13000)
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