Question 1

Which of the following is not an advantage of lifetime gifts?

Accepted Answer

A)  The annual exclusion can shield thousands of dollars from taxation. 
B)  Property appreciation does not enter the estate tax calculation. 
C)  A stepped-up basis is secured for appreciated gifts. 
D)  Gift-splitting allows spouses to combine their annual exclusions 
A)  The annual exclusion can shield thousands of dollars from taxation. 
B)  Property appreciation does not enter the estate tax calculation. 
C)  A stepped-up basis is secured for appreciated gifts. 
D)  Gift-splitting allows spouses to combine their annual exclusions C

Question 2

How does the probate estate differ from the gross estate?

Accepted Answer

The gross estate includes all property and property interests held by the decedent at death. The probate estate only includes property of the decedent that is transferred by will or by the laws of intestacy to the decedent's heirs. It excludes property interests that pass to the beneficiaries by operation of law, such as interests in property held in joint tenancy with right of survivorship.

Question 3

Glenda, age 8, has $6,150 interest from a trust fund established by her grandfather several years ago. What is Glenda's tax liability?

Accepted Answer

A)  $1,085 
B)  $720 
C)  $750 
D)  $415 
A)  $1,085 
B)  $720 
C)  $750 
D)  $415 B

Question 4

Painting a house for your mother is not a taxable gift.

Accepted Answer

A) True 
 B)False

Question 5

Jose set up a trust for his two married daughters with $500,000 of stocks and bonds at the end of 2017. Jose can change the trust beneficiaries at any time, however. In 2018, each of the daughters receives $16,000 from the trust. What are Jose's gift tax consequences as a result of these events? Explain.

Accepted Answer

Because Jose can change the trust benefi

Question 6

Indicate by a T if the following results in a taxable gift and an N if it does not result in a taxable gift.
-$100,000 diamond ring given to a fiancé

Accepted Answer

The answer of Indicate by a T if the following...

Question 7

No estate tax is due if a husband leaves his entire estate to his wife.

Accepted Answer

A) True 
 B)False

Question 8

A taxpayer can elect to pay a gift tax rather than use part of his or her unified credit.

Accepted Answer

A) True 
 B)False

Question 9

The tax on generation skipping transfers has been repealed.

Accepted Answer

A) True 
 B)False

Question 10

All of the following apply to the Coverdell education savings account except:

Accepted Answer

A)  Beneficiaries may be able to be changed. 
B)  Allows the same contribution as a Section 529 qualified tuition plan. 
C)  Has a $2,000 annual contribution limit. 
D)  Limits the contribution of higher income taxpayers. 
A)  Beneficiaries may be able to be changed. 
B)  Allows the same contribution as a Section 529 qualified tuition plan. 
C)  Has a $2,000 annual contribution limit. 
D)  Limits the contribution of higher income taxpayers.

Question 11

An income interest in a trust

Accepted Answer

A)  must be established for a fixed term in years. 
B)  is not eligible for the annual exclusion. 
C)  must be irrevocable to be eligible for the annual exclusion. 
D)  is irrevocable if the donor only controls who may receive trust income. 
A)  must be established for a fixed term in years. 
B)  is not eligible for the annual exclusion. 
C)  must be irrevocable to be eligible for the annual exclusion. 
D)  is irrevocable if the donor only controls who may receive trust income.

Question 12

What is the benefit(s) of a living trust?

Accepted Answer

A)  Keeps assets in the trust out of the gross estate. 
B)  Keeps assets in the trust out of the probate estate. 
C)  Maintains privacy for the beneficiaries. 
D)  Both (b) and (c). 
A)  Keeps assets in the trust out of the gross estate. 
B)  Keeps assets in the trust out of the probate estate. 
C)  Maintains privacy for the beneficiaries. 
D)  Both (b) and (c).

Question 13

Gift splitting allows a married couple to use both their annual exclusions in determining taxable gifts.

Accepted Answer

A) True 
 B)False

Question 14

The amount of the kiddie tax is the sum of

Accepted Answer

A)  the child's tax on the child's earned income and the tax on all the child's unearned income at the trust and estate's tax rates. 
B)  the trust and estate's tax on the child's unearned income and the child's tax on the earned income. 
C)  the trust and estate's tax on the child's unearned income in excess of $2,100 and the child's tax on the balance of his or her taxable income. 
D)  $1,000 or the tax on unearned income. 
A)  the child's tax on the child's earned income and the tax on all the child's unearned income at the trust and estate's tax rates. 
B)  the trust and estate's tax on the child's unearned income and the child's tax on the earned income. 
C)  the trust and estate's tax on the child's unearned income in excess of $2,100 and the child's tax on the balance of his or her taxable income. 
D)  $1,000 or the tax on unearned income.

Question 15

Cheryl bought some stock for $110,000. Two years later, she gave the stock to her brother, Harold, when its value was $100,000. Three years later, Harold sold the stock for $105,000. What is the value of the gift to Harold, and his gain or loss on the sale, respectively?

Accepted Answer

A)  $100,000; 0 gain/loss 
B)  $100,000; $5,000 gain 
C)  $110,000; 0 gain/loss 
D)  $110,000; $5,000 loss 
A)  $100,000; 0 gain/loss 
B)  $100,000; $5,000 gain 
C)  $110,000; 0 gain/loss 
D)  $110,000; $5,000 loss

Question 16

Which of the following is a taxable gift (before applying the unified credit)?

Accepted Answer

A)  Christian transfers $5,000 to his friend Crystal 
B)  Carmen gives $5,000 in stocks to her church 
C)  Yamile gives $30,000 to her husband, Jose. 
D)  Jessica transfers $30,000 into an irrevocable trust for the benefit of her two children. 
A)  Christian transfers $5,000 to his friend Crystal 
B)  Carmen gives $5,000 in stocks to her church 
C)  Yamile gives $30,000 to her husband, Jose. 
D)  Jessica transfers $30,000 into an irrevocable trust for the benefit of her two children.

Question 17

Crystal deposited $50,000 into a joint savings account in her name and the name of her son, Jason. Later that same year, Jason withdrew $16,000 from the account. If Crystal made no other gifts to Jason during that year, what is the value of Crystal's taxable gifts (before applying the unified credit)?

Accepted Answer

A)  $1,000 
B)  $12,000 
C)  $16,000 
D)  $25,000 
A)  $1,000 
B)  $12,000 
C)  $16,000 
D)  $25,000

Question 18

Clarice, age 90, has accumulated $1.5 million in net assets. Included in this are three blocks of stock: Stock A has a basis of $300,000 and a fair market value of $400,000; Stock B has a basis of $400,000 and a fair market value of $200,000; Stock C has a basis of $100,000 and a fair market value of 400,000. Clarice needs $200,000 now to pay off the mortgage on her daughter's home and she wants to make a $400,000 donation to her Church either as a lifetime or testamentary transfer. Which assets should she sell to accomplish this with the least current tax cost?

Accepted Answer

A)  Sell Stocks A and C now. 
B)  Sell Stock B and leave stock C to the Church upon her death. 
C)  Sell Stock A and leave stock C to the Church upon her death. 
D)  Sell Stock C and leave Stock B to the Church upon her death. 
A)  Sell Stocks A and C now. 
B)  Sell Stock B and leave stock C to the Church upon her death. 
C)  Sell Stock A and leave stock C to the Church upon her death. 
D)  Sell Stock C and leave Stock B to the Church upon her death.

Question 19

Charles gave his three grandsons $21,000 each, his friend, Joe, $16,000, and his daughter $31,000. His second wife, Marla, gave her three children $51,000 each and $50,000 to her church. What are their combined taxable gifts if they do not elect gift splitting?

Accepted Answer

A)  $305,000 
B)  $255,000 
C)  $143,000 
D)  $ 71,000 
A)  $305,000 
B)  $255,000 
C)  $143,000 
D)  $ 71,000

Question 20

Shoshone sold her home to her son and his wife as joint tenants for $100,000. The home had been appraised at $150,000. She sold her daughter an auto valued at $10,900 for $500 and she took her sister on a vacation and paid all of her sister's expenses that amounted to $7,000. What is the total of Shoshone's taxable gifts? Explain.

Accepted Answer

The bargain purchase of the auto and the

Which of the following is not an advantage of lifetime gifts?

How does the probate estate differ from the gross estate?

Glenda, age 8, has $6,150 interest from a trust fund established by her grandfather several years ago. What is Glenda's tax liability?

Painting a house for your mother is not a taxable gift.

Indicate by a T if the following results in a taxable gift and an N if it does not result in a taxable gift. -$100,000 diamond ring given to a fiancé

No estate tax is due if a husband leaves his entire estate to his wife.

A taxpayer can elect to pay a gift tax rather than use part of his or her unified credit.

The tax on generation skipping transfers has been repealed.

All of the following apply to the Coverdell education savings account except:

An income interest in a trust

What is the benefit(s) of a living trust?

Gift splitting allows a married couple to use both their annual exclusions in determining taxable gifts.

The amount of the kiddie tax is the sum of

Cheryl bought some stock for $110,000. Two years later, she gave the stock to her brother, Harold, when its value was $100,000. Three years later, Harold sold the stock for $105,000. What is the value of the gift to Harold, and his gain or loss on the sale, respectively?

Which of the following is a taxable gift (before applying the unified credit)?

Charles gave his three grandsons $21,000 each, his friend, Joe, $16,000, and his daughter $31,000. His second wife, Marla, gave her three children $51,000 each and $50,000 to her church. What are their combined taxable gifts if they do not elect gift splitting?

Introduction to Taxation

The Tax Practice Environment

Determining Gross Income

Employee Compensation

Deductions for Individuals and Tax Determination

Business Expenses

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Tax-Deferred Exchanges

Taxation of Corporations

Sole Proprietorships and Flow-Through Entities

Filters

Exam 12: Estates, Gifts, and Trusts

Which of the following is not an advantage of lifetime gifts?

How does the probate estate differ from the gross estate?

Glenda, age 8, has $6,150 interest from a trust fund established by her grandfather several years ago. What is Glenda's tax liability?

Painting a house for your mother is not a taxable gift.

Indicate by a T if the following results in a taxable gift and an N if it does not result in a taxable gift. -$100,000 diamond ring given to a fiancé

No estate tax is due if a husband leaves his entire estate to his wife.

A taxpayer can elect to pay a gift tax rather than use part of his or her unified credit.

The tax on generation skipping transfers has been repealed.

All of the following apply to the Coverdell education savings account except:

An income interest in a trust

What is the benefit(s) of a living trust?

Gift splitting allows a married couple to use both their annual exclusions in determining taxable gifts.

The amount of the kiddie tax is the sum of

Cheryl bought some stock for $110,000. Two years later, she gave the stock to her brother, Harold, when its value was $100,000. Three years later, Harold sold the stock for $105,000. What is the value of the gift to Harold, and his gain or loss on the sale, respectively?

Which of the following is a taxable gift (before applying the unified credit)?

Charles gave his three grandsons $21,000 each, his friend, Joe, $16,000, and his daughter $31,000. His second wife, Marla, gave her three children $51,000 each and $50,000 to her church. What are their combined taxable gifts if they do not elect gift splitting?

Introduction to Taxation

The Tax Practice Environment

Determining Gross Income

Employee Compensation

Deductions for Individuals and Tax Determination

Business Expenses

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Tax-Deferred Exchanges

Taxation of Corporations

Sole Proprietorships and Flow-Through Entities

Filters