The answer for question 1a (i) is Revocable trust and the reason being given is…Becker should sell the shares in the revocable trust because current taxes on realized capital gains will be the same for either revocable or irrevocable trust. Assets in the irrevocable trust are not subject to estate tax. Assets in the revocable trust are subject to estate taxes upon Becker’s death at which time the cost basis will be increased to market value. Thus total taxes are minimized by selling from the revocable trust.
Can someone please explain the reason behind the explanation. I am failing to get it. I was thinking because assets in the irrevocable trust are not subject to estate tax, the overall taxes will be lower.
Help please.