Estate Planning Please provide little explanation with the answers. ............

Question

Estate Planning

Please provide little explanation with the answers.

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1- All the following statements concerning the tax implications of a gift made to a person who dies within one year of receipt of the gift are correct EXCEPT:

A. If the property is willed back to the original donor, such property is denied the usual stepped-up basis for valuing property transferred to a designated heir.

B. The beneficiary of the deceased’s will can be in receipt of capital gains, even if he or she sells the property on the date of the testator’s death.

C. If the decedent wills the property to someone other than the original owner or his or her spouse, the transferee can have the benefit of the stepped-up basis.

D. If the original donor is the spouse of the decedent-donee, a testamentary disposition to the decedent’s children will prevent realization of the benefits of the stepped-up basis.

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2- (D) and (E), a married couple, make a gift of their vacation home to their children but reserve the right to use the property during their lifetimes. Under these circumstances, which of the following statements are correct?

I. The property will be included in the donor’s gross estate at their deaths.

II. The gift tax annual exclusion is not available to D and E.

III. The unified tax credit is available to D and E.

A.      I and II only

B.      I and III only

C.     II and III only

D.     I, II and III

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Explanation / Answer

1) Statement A, B and C are valid in case of person dies within a year of getting a gift. Statement D, which is If the original donor is the spouse of the decedent-donee, a testamentary disposition to the decedent’s children will prevent realization of the benefits of the stepped-up basis.. is not true.

2)  Statement I is definitely false, since at their deaths, property is not donors property whereas it is their childrens property. So this is Wrong. (The property will be included in the donor’s gross estate at their deaths.)

So option C is correct

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