Question

Fill in the blanks for the following questions (Possible answers have been provided after each blank)

In terms of the Federal income and transfer taxes, identify what is accomplished in the following disclaimer situations occurring in 2017.
a. Lester dies without a will and is survived by a daughter, Nora, and a grandson, Nick. The major asset in Lester's estate is stock worth $3,500,000. Because Nora is already well-off and in ill health, she disclaims Lester's property.
By disclaiming her interest, Nora is able to pass the property to Nick free of any gift tax. __ (True/False)
b. Under her will, Audrey's estate is to pass $6,000,000 to her son, Raymond, and the $3,000,000 remainder to her husband, George. Raymond disclaims $510,000 of his inheritance.
Raymond's disclaimer __ (does not prevent/prevents) $510,000 from being subject to estate tax. As the $510,000 now passes to __ (George/Raymond), it __ (is not qualified/qualifies) for the marital deduction.
c. Under Isaac's will, $4,000,000 is to pass to his wife Brenda, and the $5,400,000 remainder to his daughter Sybil. Brenda disclaims $90,000 of her inheritance.
Brenda's disclaimer __ (is subject to a/passes free of any) transfer tax and it __ (increases/reduces) the marital deduction allowed to Isaac's estate.
d. Under Tricia's will, her $3,000,000 cubist art collection is to pass to her husband, Leroy. If Leroy disclaims the collection, it passes to the San Francisco Museum of Modern Art. Leroy neither understands nor admires this type of art.
Leroy should __ (accept/reject) the collection and __ (have it directly transfer/subsequently transfer it) to the museum. In this manner, Leroy generates __ (an income tax deduction/taxable income) .

Answer 1

Answer:-

-Make the disclaimer in writing.

-Disclaim the asset within nine months of the death of the assets' original owner (in the case of a minor beneficiary wishing to disclaim, the disclaimer cannot take place until after the minor reaches the age of majority.

-The person disclaiming cannot have benefited from the proceeds of the disclaimed property..

-The person disclaiming cannot have the assets indirectly pass to him or her.

Below is details of point wise answer :-

a) As Nora disclaimed her inheritance, it has to satisfy the above 4 rules to be qualified disclaimer as per IRS. It is important for her to do so as she is already well off, meaning she will be having good amount of tax liability as well.

b) As in the given case, Audrey has transferred her property to her son and husband. and the son disclaims, now here this disclaimer can be thought of as an indirect transfer of such property by son to himself. As Son would be the Heir of his father's property. Hence this disclaimer can be termed as unqualified disclaimer.

c) This is a qualified disclaimer as Brenda is the mother and disclaiming her assets which are being transferred to her child. Note: Brenda must not take any benefits from the assets disclaimed.

d) Leroy's disclaimer is a qualified disclaimer as the assets are being transferred to a modern art museum and he cannot take them back in any case.