What are estate tax consequences of these transactions

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Reference no: EM1374210

In 2000, June, a 75-year-old widow, creates an irrevocable trust naming her five adult grandchildren as the beneficiaries. The assets transferred in trust consist of marketable securities (worth $800,000) and June's personal residence (worth $400,000).

Bob, June's younger brother and a practicing attorney, is designated as the trustee. Other provisions of trust are as follows.
• Bob is provided the discretion to distribute the income to the beneficiaries based on their need or add it to corpus. He is also providing the power to change trust investments and to terminate the trust.
• The trust is to last for June's lifetime or, if sooner, until termination by Bob.
• Upon termination of the trust, the principal and any accumulated income are to be distributed to the beneficiaries.

For 2000, June files a Form 709 to report the transfer in pays and trust a gift tax based on value of$1.2 million ($800,000 + $400,000).

After the transfer in trust and up to the time of her death, June continues to occupy the residence. Although she pays no rent, she maintains property and pays the yearly property taxes. June never discuss matter of her continued occupancy of the residence with either Bob or the beneficiaries of the trust.

Upon June's death in 2008, value of the trust is $2.3 million, broken down as follows: marketable securities and cash ($1.6 million) and residence ($700,000). Shortly thereafter, Bob sells the residence, liquidates the trust, and distributes the proceeds to the beneficiaries. Evaluate what are the estate tax consequences of these transactions to June?

Reference no: EM1374210

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