This Year Nathan Transferred $2 Million to an Irrevocable Trust

question 78

Multiple Choice

This year Nathan transferred $2 million to an irrevocable trust established for the benefit of his nephew.The trustee is directed to accumulate income for the next 5 years before distributing the trust corpus to Nathan's nephew.In past years Nathan has made taxable gifts of $6 million and used an applicable credit on an exemption equivalent of $5 million.What amount of gift tax,if any,must Nathan remit?

• A) $620,000.
• B) $400,000.
• C) $345,450.
• D) zero-there is a $10.98 million exemption equivalent.
• E) None of the choices are correct. The amount of tax cannot be estimated without the use of a tax rate schedule.

Recognize the need for and preparation of adjusting entries for accrued expenses, prepaid expenses, and contingencies.

Comprehend the process of purchasing an asset with deferred payments including interest and its impact on the balance of debt principal over time.

Understand how changes in current asset and current liability accounts impact cash flow.

Recognize the significance of present value concepts in financing transactions and equipment purchases.

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