D, a single taxpayer, is the owner of a policy of insurance on D’s own life, a “
ID: 2448824 • Letter: D
Question
D, a single taxpayer, is the owner of a policy of insurance on D’s own life, a “Straight life” policy requiring annual $5,000 premium payments until D’s death.
When the policy was properly valued at $75,000, D transferred the policy to a trust under which, when D died, the proceeds were to be invested and paid to C for life, with a remainder to GC, C’s child.
D transferred $5,000 per year to the trust to pay the premiums on the policy.
D also gave C the right, in each year, to take $5,000 transfer from the trust and use it for any purpose C desires.
If this was D’s only gift-type transfer in the year, what was the “total amount of gifts” by D for the year?
Explanation / Answer
A. Total amount of gifts for the year is : 75000 + 5000 = $ 80,000.
B. The result would be same in question, above, if D instead transferred the policy to a trust under which, when D died, the proceeds were to be invested and paid to C for life, with a remainder to GC, C’s child.
C. Answer would be $ 5000 in this case.
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