Noah D. Canby died on May 9, 2012, as a
result of a boating mishap. He is survived by his adult children: Isabella and
Benjamin. At the time of his death, Noah lived at 13410
Memorial Drive, Houston, Texas 77079. Noah was
predeceased by his wife, Olivia, who died in 2008. Details regarding Noahâ€™s
estate are summarized below.
â€¢ At the time of his death, Noah owned two
whole life policies issued by Peacock Insurance
Company. Each policy has a maturity value of
$200,000 and lists Isabella and
Benjamin as the beneficiaries.
â€¢ Noah was a participant in his employerâ€™s
contributory qualified pension plan. As of May 9, 2012, the balance in his
account is found to be:
Employerâ€™s contribution $800,000
Noahâ€™s contribution 800,000
Income earned by the plan 400,000
Because Noah failed to designate a new
beneficiary after his wife died, the plan proceeds of $2,000,000 are paid to
his estate on July 23, 2012.
â€¢ As an investment, Noah and his wife had
purchased a tract of land near Plano (TX) in 2002. They paid $200,000 for the
property and listed ownership as â€œNoah and Olivia
Canby, tenants by the entirety with right of
survivorship.â€ The Plano property is worth $600,000 on May 9, 2012.
â€¢ The purchase of the Plano property (see
previous item) was partly financed with mortgage funds provided by Plano Trust
Company. As of May 9, 2012, the mortgage has a balance due of $101,000
(including accrued interest).
â€¢ In 2009, Noah and his daughter purchased
grazing land in Bexar County with title being listed as â€œNoah and Isabella
Canby as equal joint tenants with right of survivorship.â€
The land is near San Antonio and was
considered to have future potential for residential development. Of the
$400,000 purchase price, Noah furnished $100,000 and Isabella provided $300,000
(from funds she inherited from her mother). The land has a value of $600,000 on
May 9, 2012.
â€¢ Ranch in Bandera (TX) with title listed
as â€œNoah, Olivia, Isabella, and Benjamin
Canby, equal tenants in common.â€ (Oliviaâ€™s
interest in the ranch passed to Noah under her will.) The property was
purchased by Olivia in 2002 for $1,200,000. (Although Olivia used her separate
funds, no Â§ 2513 election was made when she filed a Form 709 reporting the
gift.) The ranch has a value of $1.5 million on May 9, 2012.
â€¢ Noahâ€™s boating mishap, which led to his
death, was caused when his sailboat was carelessly swamped by a supply boat
owned by Gull Offshore Service Corporation. The captain of the supply boat was
clearly negligent and later fired by Gull. To avoid any further adverse
publicity of a court proceeding, Gull immediately offered Noahâ€™s estate a
settlement of $1.5 million. As executors of Noahâ€™s estate, Isabella and
Benjamin accepted the offer and received the settlement on July 25, 2012.
Benjamin also wanted to avoid any trial as
their fatherâ€™s sailboat had recently been cited by the Coast Guard and local
maritime regulatory authorities for several safety violations.
â€¢ Noah inherited his personal residence on
Memorial Drive from Olivia. Under
Noahâ€™s will, the property is to pass to Grace
Methodist Church to serve as a parsonage for their minister. On May 9, 2012,
the property has an appraised value of $1.1 million.
â€¢ Other assets belonging to Noah include
Checking account at Metro Bank $ 11,200
at Wells Fargo Bank (includes accrued interest to May 9, 2012) 105,000
of Houston Public Transit bonds (includes accrued interest to May 9, 2012)
Insurance claim with Flamingo Casualty 141,000
Personal and household effects (furniture,
auto, jewelry, etc.) 96,000
receivable from Alan Canby 20,000
After a careful reading of the Gull Offshore
settlement (see prior note), the executors of Noahâ€™s estate could find no
mention that the $1.5 million included the loss of the sailboat. Therefore,
they filed a claim with Flamingo Casualty for the recovery allowed under the
policy insuring the sailboat.
note receivable arose from a loan Noah made in 2009 to his nephew, Alan
Canby. Alan was to use the $20,000 to start a
driver training school. After almost a year of losses, the operation ceased.
Alan never filed for bankruptcy but left town, and his current whereabouts are
â€¢ Noahâ€™s liabilities (besides the mortgage
held by Plano Trust Company and paid by the estate) include:
Credit card debt $ 3,400
Unpaid household bills (utilities, security service,
pest control, etc.) 2,300
Fines due for safety violations on sailboat
Amount due on church pledge 8,000
Amount promised to a niece, Natalie Canby,
when she graduated from college 5,000
Federal income tax (January 1, 2012 to May 9,
â€¢ Funeral and administration expenses are
Funeral expenses $12,000
Attorneyâ€™s fees 38,000
Accounting fees 18,000
Appraisal fees and court costs 11,000
Isabella and Benjamin are the sole heirs. Due
to their experience in handling their motherâ€™s estate, Noahâ€™s will designates
them as the executors of his estate. For obvious reasons, they serve without
fee. The administration of Noahâ€™s estate is completed with the Harris County
Probate Court on November 29, 2012.
Prepare an estate tax return (Form 706) for
Noah. Make the following assumptions.
â€¢ No Â§ 2032 election is made, and Â§Â§ 2032A
and 6166 (see Chapter 19) are not appropriate.
â€¢ Disregard any request for information
that is not available.
â€¢ Some deductions require a choice (Form 706
or Form 1041) and cannot be deducted twice (see Chapters 19 and 20). Resolve
all choices in favor of Form 706.
â€¢ Noah has made no prior taxable gifts.
â€¢ Relevant Social Security numbers:
Social Security Number
D. Canby 123-45-6785
Olivia Canby 123-45-6786
Isabella Canby 123-45-6787
Benjamin Canby 123-45-6788