Tax Return Problems – formerly Appendix C Estate Tax Return Problem Clark Griswold (SSN…

Tax Return Problems – formerly Appendix C
Estate Tax Return Problem
Clark Griswold (SSN 000-00-0001) is a wealthy engineer and inventor who retired to his residence in Fort Collins (Larimer County), Colorado. Clark is married to Ellen (SSN 000-00- 0002) and they have two adult children, Russell and Audrey. Clark passed away on March 22 of this year at the age of 60, and his executor, Frank Shirley, a CPA (SSN 005-00-0000), has hired you to calculate the estate tax and prepare a draft of the 2020 estate tax return (pages 1-3 of Form 706 with no supplemental schedules). Clark’s residence (domicile) has been in Colrado since 1994, and the estate is being administered through the Larimer County Probate Court.
Frank has inventoried Clark’s assets and has listed the value of his assets below. The auto, residence, and checking account were owned jointly (with the right of survivorship) with his wife. Clark also owned a whole life insurance policy with a cash surrender value of $50,000. Ellen and Clark’s estate were listed as beneficiaries on the insurance policy, with Ellen receiving
$1 million and the estate receiving the remainder of the proceeds. The Ajax common stock, the real estate, and the patent were all owned by Clark rather than joint ownership. Frank also noted that the real estate is subject to an $800,000 mortgage. At his death Clark also owed $1,500 on his credit card.
Property
Value
Adjusted Basis
Auto
$    20,000
$    55,000
Personal effects
75,000
110,000
Checking account
250,000
250,000
28,800 shares of Ajax common stock
7,200,000
270,000
Residence
6,800,000
480,000
Life insurance
6,000,000
50,000
Real estate
3,500,000
2,100,000
Patent
8,500,000
100,000
Clark’s will instructs Frank to distribute Clark’s property as follows: Ellen inherits Clark’s personal effects, Russell inherits the patent, and Audrey inherits 20,000 shares of the Ajax stock (publicly traded) and the real estate. The will also instructs Frank to distribute 1,000 shares of the Ajax stock to State University (an educational institution). The remaining shares of Ajax are to be sold, and after paying Clark’s personal debts, the residual of the estate (if any) is divided equally between Russell and Audrey. The estate paid Clark’s personal debts (credit card debt) and $4,300 of funeral expenses associated with Clark’s burial. Finally, the estate paid Frank
$27,000 in executor’s fees associated with the administration of Clark’s estate. The executor does not elect to use the alternate valuation date (AVD).
Clark’s tax records indicate that in 2007 Clark made a $1 million taxable gift to his children. Clark filed a timely gift tax return (Form 709) and paid no gift taxes.