Estate Community property and Forced heirship

CFA Level III Portfolio Management
#1

Need help on the AM 2018 Question 5A regarding the community property and forced heirship

under community property - survivor spouse will receive half estate , why it is minus 6 mill (cost basis) then divide by 2 ? shouldn’t it just divide by 2? - 16mill/2 = 8 mill ? They are asking the value, not additional Value, so Value should be current value which is 16 mill?

Also for Q5C - third point:

  • The value of the Gondos’ taxable estate is lowered as a result of the annual gifts. Since it is assumed that Erica’s estate will not be subject to estate tax, the gifts further reduce any future estate taxes for the Gondos.

Shouldn’t it lower for Gondo’s taxable estate if Gondo’s just straight give the 150 mill gift instead of annually 30 mill?

Thank you

#2

Community property refers to the wealth gained during the marriage. Since he had $6m at the time of marriage, and gained $10m, only the $10m is subject to community property.

#3

got it…thanks, so where is the 6 mill go to? (out of CFA topic maybe) :slight_smile: