Explain to your client Mary the process of transferring a re

Explain to your client, Mary, the process of transferring a residential house worth $700,000 and company stock worth $10,000,000 to her children 1) before her death and 2) after her death. Additionally, explain the tax liabilities involved and present two plans to 1) minimize taxes and 2) avoid taxes.

Solution

Mary may gift the house to her children tax free before her death because the value of the house is less than exemption tax limit worth $5.45 for year 2016. and this limit will we offset by the annual limit of $14000, so mary transfered the house to her children no gift tax will be levied.

Mary should transfer her house to her children after her death by way of will because in this method the cost of the house on transfer will be considered as the market value on the day they inherited that and the house has value below exemption limit of $5.45 million for 2016, so Mary may go this way to avoid or minimize the tax liability on transfer of house to her children.

Mary should transfer the stocks of worth $10000000 to her children and children should keep them for more than a year to change the holding of the stocks from short term to long term. now the children will face minimum tax liability as per their tax bracket on transfer of shares as per their earning level. and to avoid gift tax mary should transfer them to in limit of $5.45 million for year 2016. and this method may also be same useful before death and after death.

So above description tells about to minimize or avoid taxes on transfer of house and stocks to children by mary.