Reference no: EM132493743
Question - On June 1, 2010, Grantor creates an IDGT (Intentionally Defective Grantor Trust) and sells to the IDGT a 20% limited partner interest in ABC Partnership. In exchange, the IDGT delivers to the Grantor a "balloon" promissory note with a term of nine years and interest payable annually at a rate of 2%. The current undiscounted value of a 100% interest in the partnership is $10,000,000. Assume that a 30% valuation discount applies.
Part A - If Grantor first wishes to make a 10% "seeding" gift, what is the amount of cash or other property that Grantor must gift to the IDGT? Please explain your answer in a math like sense.
Part B - What is the original Principal amount of the promissory note?
Part C - What amount is due on the maturity date of the promissory note?
Part D - Suppose the Grantor dies on June 1, 2016, immediately after having received the sixth annual interest payment due on the promissory note. At that time, the discounted value of 20% limited partner interest in the ABC Partnership is $2,000,000. What amount is included in Grantor's gross estate relate to the sale transaction described in this problem?
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