Exam 12: The Gift Tax

Identify which of the following statements is false.

On July 1, Frank loans his brother Matt $200,000. The loan is evidenced by an interest-free demand note. The loan is still outstanding on December 31. The applicable interest rate is 12%. Frank is treated as having made a gift of

Which of the following situations requires that a gift tax return be filed?

Phil transfers $50,000 to a revocable trust benefiting his son, Josh. The transfer is a taxable gift.

Tia funds an irrevocable trust with $100,000, naming Vonda to receive income for life. Tia also grants Vonda a general power of appointment during her life. During the next year, Vonda directs the trustee to give $100,000 to Rick. Which of the following statements is not correct?

In the current year, Melanie makes two transfers to Peter, her husband. In June, she gives him land valued at $50,000. In December, she transfers $500,000 to a trust with a bank named as trustee. All income must be paid to Peter monthly for life. At Peter's death, the property passes to their children. Compute the maximum marital deduction assuming Melanie makes the appropriate elections.

Ward and June decide to divorce after 30 years of marriage. Ward transfers $500,000 to June in settlement of her property rights. What are the gift tax consequences of this transfer?

Why are Crummey trusts popular for minors?

Steve gave stock with an adjusted basis of $7,000 and an FMV of $10,000 to Alice. No gift tax was paid. Later, Alice sold the stock for $12,000. The gain Alice will recognize on the sale is

On April 1, Martha opens a joint bank account with Ned and deposits $1,000. Ned deposits $500 into the account on April 2. On May 2, Martha withdraws $750. Two days later, Ned withdraws $600.

Greg transfers property on August 8 of the current year with an adjusted basis of $40,000 and an FMV of $90,000 to his ex-wife as a property settlement that is part of their divorce agreement. The property settlement agreement and the divorce were both finalized on June 3 of the current year. Greg has made a gift of

On September 1, George transfers his entire ownership rights in a $250,000 life insurance policy on his own life to his sister, Sally. The policy's interpolated terminal reserve is $30,000 as of September 1. On July 1, George had paid the policy's $6,000 annual premium. What are the gift tax consequences, if any?

Identify which of the following statements is true.

What is the due date for the gift tax return? Are there any exceptions? If so, what are they?

In the current year, Cesar, who is single, gives $26,000 to each of his 20 nieces and nephews for a total property transfer of $520,000. Cesar's taxable gifts total

Jennifer and Terry, a married couple, live in Illinois; which is a common law state. In the current year, Terry gives his sister $200,000 cash. Jennifer and Terry agree to gift splitting. Neither Jennifer nor Terry has made any taxable gifts in prior years. What are Jennifer and Terry's taxable gifts?

A net gift occurs when a donor makes a gift subject to the agreement that the recipient agrees to pay the gift tax.

Damitria transfers her rights in a $100,000 insurance policy on June 1 to Tremayne. The policy has a cash value of $9,000 and an interpolated terminal reserve of $8,500. The annual policy premium of $12,000 had been paid on January 1. Damitria's gift (before the annual gift tax exclusion) to Tremayne is

Gordon died on January 1 and by his will left land with an adjusted basis of $60,000 and an FMV of $100,000 to Becky. Becky disclaims the property on December 31 of the year of death, when the land was still worth $100,000. Becky has made a gift (before the annual gift tax exclusion) of

Ida sells some stock to Mae for $20,000 at a time when the stock is valued at $50,000. Later in the year, she gives Mae $16,000 in cash. a) What is the amount of Ida's taxable gifts? b) How would your answer to Part (a) change if Ida gave the cash to Jonathan instead of to Mae?