Question

Gordon purchased real estate for $900,000 and listed title to the property as “Gordon and Fawn, joint tenants with right of survivorship.” Gordon predeceases Fawn when the real estate is worth $2,900,000. Gordon and Fawn are brother and sister. 

a. Did a gift occur when the real estate was purchased? Explain. 

b. What, if any, are the estate tax consequences upon Gordon’s death? 

c. Under part (b), would your answer change if it was Fawn (not Gordon) who died? Explain.

Answer 1

The Federal Gift and Estate Taxes

Federal gift tax is collected by an individual on transfer of right in property to another party for a consideration which is less than adequate consideration. The federal gift tax is to be paid by the person transferring the right that is donor is liable to pay the tax. In some cases if donor fails to pay then receiver has to pay tax up to the value of property received.

 

Discussion and analysis

a.

When G purchased the real estate for $900,000, he can gift F $450,000 ($900,000/2). Since in the property, joint tenants are equal owners.

 

b.

The entire purchase price is due as estate tax consequence which is $2.9 million as a property upon G’s death.

 

c.

Yes, estate tax consequence will change if F dies since her state include no value as to the property.

a.

When G purchased the real estate for $900,000, he can gift F $450,000 ($900,000/2). Since in the property, joint tenants are equal owners.