Discussion:Does gross estate include a gift of a future interest?
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Discussion Forum Index --> Advanced Tax Questions --> Does gross estate include a gift of a future interest?
Discussion Forum Index --> Tax Questions --> Does gross estate include a gift of a future interest?
Sli-cgsc-cpa (talk|edits) said: | 16 May 2008 |
| Dear friends, would any one help me out of this situation:
A decedent gave his girl friend a rental house for 5 years. The girl friend lives in half of the house for free of course. A trust of the decedent manages the rental. The average rental loss is about ($1,000) per year. Should I include a contingent amount of $138,000 in the decedent's gross estate, based on the pro rata life estate of the house, and categorize the girl friend Class D beneficiary? Thanking you in advance. | |
| 20 May 2008 | |
| The value of an outstanding income interest is deducted from the gross estate. | |
| 20 May 2008 | |
| Girl friend does not seem to be a beneficiary here. (Was a gift tax return filed on transfer?) I would in general agree with Riley, but in this case would take a close look at Sec. 2035 There should be an attorney lurking. Seek him out. | |
Sli-cgsc-cpa (talk|edits) said: | 20 May 2008 |
| Thank you Riley and Dennis. My mistake, it's not of the transfer made within 3 years of decedent's death. The girl friend must survive the decedent and she did survive. Then she can live in half of the house for 5 years for free. So it's more like Sec. 2037 applying. Correct me if I'm wrong. A trust was established to handle the rental of the other half of the house, and to distribute the rental income (atually here is loss) to the girl friend and the wife's estate (my head hurts). The whole scenario is like this. Question: should I include the contingent amount in gross estate? I say it's contingent is because if the girl friend moves out during the desinated 5 years, how much should I include if it should be included. | |
| 20 May 2008 | |
| Reg. 1.1014-4(a)(2). | |
| 20 May 2008 | |
| Sounds more like a bequest than a gift. I see no exclusion from gross estate. I can't comment on what appears to be New Jersey law, however my understanding is that the inheritance tax is imposed on the transfer of assets. The right to live in the house is an income interest. | |
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