Stacey Inherits Unimproved Land (Fair Market Value of $6 Million)

question 212

Multiple Choice

Stacey inherits unimproved land (fair market value of $6 million) from her father on June 1, 2012. Stacey disclaims her interest in the property as follows: one-third on December 1, 2012; one-third on January 3, 2013; and the remaining one-third on May 31, 2013. In all cases, the disclaimers pass the interest to her son (the next heir under state law) . The Federal gift tax applies to Stacey for:

• A) All of the disclaimers.
• B) The disclaimer made in 2012.
• C) The May 31, 2013 disclaimer.
• D) All of the disclaimers made in 2013.
• E) None of the disclaimers.

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Definitions:

Average Rate

Usually refers to the mean value of a set of rates or percentages over a specified period or set of conditions.

Salvage Value

The estimated resale value of an asset at the end of its useful life.

Internal Rate

Often refers to the internal rate of return (IRR), a metric used in capital budgeting to estimate the profitability of potential investments.

Payback Period

The length of time that it takes for a project to fully recover its initial cost out of the net cash inflows that it generates.