Exam 12: The Gift Tax

Donna transfers $200,000 of property to an irrevocable trust with a bank as trustee. Donna names Toby (age 60) to receive all of the trust income for the rest of his life. At Toby's death, the property is to pass to Al or Al's estate. What kind of interest do Toby and Al possess?

Which of the following transactions constitutes a completed gift made by Ellen, a widow, in the current year?

In October 1976, Marian made a large taxable gift. It was her first gift. Marian used her $30,000 specific exemption to reduce her taxable gift amount. What impact does this gift have on her unified credit and death tax base?

Hu makes a gift of his home to a local homeless shelter (a 501(c)(3) charity). Hu will retain his home for 10 years, after which the homeless shelter will take possession. The value of Hu's 10-year interest is $30,000 and the remainder interest is valued at $120,000. Which of the following statements is correct?

Miguel gives Roberta land with an adjusted basis of $50,000 and an FMV of $40,000. No gift tax is paid. Roberta sells the land for $36,000. Roberta recognizes

Identify which of the following statements is true.

Calvin transfers land to a trust. Calvin retains the right to the income from the land for the rest of his life. Upon his death, the land is to be transferred to his daughter, Melissa. Calvin's interest is

Identify which of the following statements is true.

On June 1, Sherri deposits $60,000 into a new joint bank account in the names of Sherri and John. Her friend John makes no deposits. On December 15th, John withdraws $25,000 from the joint account. What are the gift tax consequences, if any?

Connie has some acreage that is valued at $1,500,000. Her daughter would like to build a home on it, but can only afford $500,000. Connie agrees to sell it to her daughter for $500,000. Is there any gift tax consequence as a result of this transaction?

What are the requirements for classifying a transaction as a transfer of a qualified terminable interest property (QTIP)?

Mia makes a taxable gift when she makes her mother a joint owner on Mia's bank account. Mia has $25,000 in the account.

Discuss the negative aspects of gifts.

Jason funds an irrevocable trust with Liberty Bank as trustee and reserves the right to receive the income for seven years. He provides that at the end of the seventh year, the trust assets will pass outright to his adult daughter, Paula, or to Paula's estate should Paula not be alive. Jason transfers assets valued at $1.5 million to the trust; the assets at present are producing income of about 7.5% per year. Assume that the Sec. 7520 rate per the actuarial tables for the month of the transfer is 10%. What tax issues should Jason consider regarding the trust?

The computation of the gift tax liability for a current year

Sandra, who is married, creates an irrevocable trust in the amount of $200,000 for her 18-year-old daughter, Kelly. She names the bank as trustee. Before Kelly reaches age 21, the trustee may pay the income to Kelly. Kelly will receive any undistributed assets when she reaches age 21. If Kelly dies before age 21, the assets will be paid to her estate. In addition, Sandra creates an irrevocable trust for her son, Kevin, age 21. He is entitled to withdraw up to $30,000 per year. Sandra contributes $30,000 in the current year. Sandra elects gift splitting with her husband. Her husband makes no gifts in the current year. Sandra's annual exclusions to be claimed on her gift tax return total

Vincent makes the following property transfers in the current year: • $5,000 tuition for a grandson paid directly to the school • $1,000 medical expense for a child paid directly to a hospital • $500 donation to the Democratic party • $10,000 property settlement in conjunction with a divorce • $3,000 room and board at college for a grandson paid directly to the school Vincent's gifts for the year before considering the annual gift tax exclusion total

Identify which of the following statements is true.

Identify which of the following statements is true.

Calvin transfers land to a trust. Calvin retains the right to the income from the land for the rest of his life. Upon his death, the land is to be transferred to his daughter, Melissa. Melissa's interest is