Andrea Transferred $500,000 of Stock to a Trust, with Income

question 16

Essay

Andrea transferred $500,000 of stock to a trust, with income to be paid to her niece for 20 years (value $125,000) and the remainder to her nephew (value $375,000). Andrea named a bank as independent trustee but retained the power to determine how much income, if any, will be paid in any particular year. What is the amount of the taxable gift, if any? Explain your answer.

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Definitions:

Primary Bronchus

One of the two main branches of the trachea that convey air into the lungs.

Respiratory Bronchiole

The very small airways in the lungs where gas exchange between air and blood takes place, part of the respiratory zone.

Terminal Bronchiole

The smallest airways in the lungs, located at the end of the bronchiole tree, not directly involved in gas exchange.

Secondary Bronchus

Branches of the primary bronchi that lead into each lobe of the lungs, further branching into the tertiary bronchi.