ACC 565
1. Tax-Planning Client Letter on Irrevocable Trusts, Gift Tax, and Estate Tax

Overview

Suppose you are a CPA, and your client has requested advice regarding establishing an irrevocable trust for his two grandchildren. He wants the income from the trust paid to the children for 20 years and the principal distributed to the children at the end of 20 years.

Instructions

Use the Internet and Strayer Library to research the rules regarding irrevocable trusts, gift tax, and estate tax. Be sure to use the six-step tax research process in Chapter 1 and demonstrated in Appendix A of your textbook as a guide for your written response.

Write a 1–2 page letter in which you:

1. Analyze the effect of an irrevocable trust on the gift tax and future estate taxes.

2. Suggest other significant alternatives that the client could use both to reduce estate tax and to maximize potential advantages of the payment of gift taxes on transfers of property.

3. Use the six-step tax research process located in Chapter 1 and demonstrated in Appendix A of the textbook to record your research for communications to the client.