Sarah and Clem Are Very Wealthy and Have a Program

question 4

Essay

Sarah and Clem are very wealthy and have a program of charitable and family giving. In 2018, they give $20,000 to each of their 4 grandchildren, $30,000 to Clem's brother, stock valued at $40,000 (basis = $20,000) to the Cancer society, and they buy a home valued at $525,000 for Sarah's mother. In addition, Clem puts $500,000 of his stock in the family's business into Sarah's name and sets up a revocable trust for Sarah's sister with $100,000 in bonds. If Clem made $1,900,000 and Sarah $1,300,000 in taxable gifts in 2016, their only prior-year taxable gifts, what are Clem's and Sarah's taxable gifts in 2018 if they elect gift splitting?

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Definitions:

Alpha Waves

Brain waves detected via EEG that are associated with relaxed, wakeful states, typically present during meditation and light sleep.

Theta Waves

Brainwave patterns associated with stages of sleep and deep meditation, reflecting a state of relaxation.

Delta Waves

Slow brain waves that are present in deep sleep and represent the deepest stage of dreamless sleep.

Stage 3 Sleep

A deep phase of sleep characterized by slow brain waves, known as delta waves, essential for restorative sleep.