Deemed to be extinguished and treated as paid

Assignment Help Financial Management

Reference no: EM131347620

John owns real estate with a fair market value of $1 million in which he has a basis of $250,000. In 2005, John sold the property to his son, Junior, for $1 million, subject to an installment note. Junior must pay the $1 million plus interest over 5 years. The note provides “Unless sooner discharged, upon John’s death, all amounts due under this note shall be deemed to be extinguished and treated as paid.”

Which of the following is true?

a. If John dies prior to receiving all payments, the present value of the installment payments not made will be included in Joe’s gross estate.

b. The unpaid installment payments are IRD.

c. No premium will be attached to the note since this is not a SCIN.

d. If John dies before he has paid off the note, he will not have to make any further payments.

Reference no: EM131347620

Questions Cloud

What is brilles cost of equity for the new issue : In the Spring of 2015 the Brille Corporation was involved in issuing new common stock at a market price of $35. Dividends last year were $1.50 and are expected to grow at an annual rate of 5% forever. Flotation costs will be 6% of market price. What ..

Discuss main finance theory : Discuss main finance theory that explains the relationship between management and and equity finance providers. explain how threats of takeover can be seen as a corporate governance mechanism? what defences do companies employ to resist possible take..

What planning technique might accomplish couple objectives : The Pastinos own a bakery in their neighborhood. Their daughter, Vera, is a divorced mother of two children, who is struggling to make ends meet. They would also like to give Vera $15,000 a year in support payments, but they do not have sufficient fu..

Agreement contains formula or method for determining price : An installment payment of the estate tax is indicated when the estate can earn a greater after-tax rate of return on its money than it would spend in interest payments. A stock redemption agreement helps to establish the value of a business for feder..

Deemed to be extinguished and treated as paid : John owns real estate with a fair market value of $1 million in which he has a basis of $250,000. In 2005, John sold the property to his son, Junior, for $1 million, subject to an installment note. Junior must pay the $1 million plus interest over 5 ..

Greatest responsibility in managing financial assets in past : Tom and Lisa have amassed great wealth and they wish to shift some of that wealth to their children. Their children, however, have not shown the greatest responsibility in managing financial assets in the past. Tom and Lisa decide to create a family ..

Respect to bargain sales : Which of the following is not true with respect to bargain sales?

Converted into an annuity interest for the grantor : In 2012, client creates a 10-year QPRT into which his primary residence is transferred. The value of the residence on the transfer date was $1 million. Since the client is a widower, the residence is far too large. The Grantor retains the right to li..

Percentage of company capital structure consists of debt : WACC and Percentage of Debt Financing Hook Industries' capital structure consists solely of debt and common equity. It can issue debt at r_d = 8%, and its common stock currently pays a $2.00 dividend per share (D_o = $2.00). What percentage of the co..

User Account

All Pages