Question 1

Roger makes a $1,000,000 cash gift on January 1 of the current year,and dies on February 1 of the current year.Roger's gift tax return is due

Accepted Answer

A) April 15 of the current year. 
B) December 31 of the current year. 
C) April 15 of the next year. 
D) nine months after his date of death. 
A) April 15 of the current year. 
B) December 31 of the current year. 
C) April 15 of the next year. 
D) nine months after his date of death. D

Question 2

On March 1,Bruce transfers $300,000 to a revocable trust with Sprint Bank as trustee.The trustee must pay out all the income to Sam during Sam's lifetime.At Sam's death,the property is to be paid to Sam Jr.On December 31,the trustee distributes $40,000 of income to Sam.What date did a gift occur? What was the amount of the gift?

Accepted Answer

A $40,000 gift occurred on December 31 because Bruce no longer had control over the distributed income.A gift did not occur on March 1 since the trust is revocable.

Question 3

Identify which of the following statements is true.

Accepted Answer

A) The creation of a joint bank account constitutes a taxable gift. 
B) The creation of a joint tenancy by one person will result in a gift equal to the other joint tenant's pro rata interest in the property. 
C) The naming of a life insurance policy beneficiary constitutes a gift for transfer tax purposes. 
D) Since municipal bond interest is exempt from federal income taxation,gifting the bonds escapes the gift tax. 
A) The creation of a joint bank account constitutes a taxable gift. 
B) The creation of a joint tenancy by one person will result in a gift equal to the other joint tenant's pro rata interest in the property. 
C) The naming of a life insurance policy beneficiary constitutes a gift for transfer tax purposes. 
D) Since municipal bond interest is exempt from federal income taxation,gifting the bonds escapes the gift tax. B

Question 4

Identify which of the following statements is true.

Accepted Answer

A) Cash paid directly to a medical school for room and board is a "qualified transfer" and not subject to the gift tax. 
B) Transfers by an individual to a political party constitute a gift subject to the gift tax rules. 
C) A statutory exemption from the gift tax is available for property transfers between divorced individuals when the divorce occurs during a three-year period beginning one year before the transfer agreement is made. 
D) All of the above are false. 
A) Cash paid directly to a medical school for room and board is a "qualified transfer" and not subject to the gift tax. 
B) Transfers by an individual to a political party constitute a gift subject to the gift tax rules. 
C) A statutory exemption from the gift tax is available for property transfers between divorced individuals when the divorce occurs during a three-year period beginning one year before the transfer agreement is made. 
D) All of the above are false.

Question 5

Which of the following is a completed gift?

Accepted Answer

A) Greta transfers $50,000 to a revocable trust benefiting her children Hans and Julio. 
B) Juan purchases a ski chalet using his own funds,but listing Penelope as a joint owner. 
C) Horatio transfers $60,000 to a bank account with Hazel.Hazel does not contribute any money to the account. 
D) Mike changes the beneficiary of his policy to Meredith. 
A) Greta transfers $50,000 to a revocable trust benefiting her children Hans and Julio. 
B) Juan purchases a ski chalet using his own funds,but listing Penelope as a joint owner. 
C) Horatio transfers $60,000 to a bank account with Hazel.Hazel does not contribute any money to the account. 
D) Mike changes the beneficiary of his policy to Meredith.

Question 6

A split-interest gift transfer

Accepted Answer

A) involves two public (charitable)organizations. 
B) involves two present interests. 
C) qualifies for a charitable contribution deduction if the recipient charity receives a guaranteed annuity,which is a present interest. 
D) cannot qualify for a deduction if a future interest is given to a charitable organization. 
A) involves two public (charitable)organizations. 
B) involves two present interests. 
C) qualifies for a charitable contribution deduction if the recipient charity receives a guaranteed annuity,which is a present interest. 
D) cannot qualify for a deduction if a future interest is given to a charitable organization.

Question 7

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.

Accepted Answer

A) True 
 B)False

Question 8

Identify which of the following statements is false.

Accepted Answer

A) The interpolated terminal reserve is similar to a life insurance policy's cash surrender value. 
B) A gift occurs when the owner of an insurance policy irrevocably assigns all ownership rights in the policy to another. 
C) The payment of premiums on an insurance policy that is owned by another does not constitute a gift. 
D) The value of the gift of a life insurance policy is the amount it would cost to purchase a comparable policy on the date of the gift. 
A) The interpolated terminal reserve is similar to a life insurance policy's cash surrender value. 
B) A gift occurs when the owner of an insurance policy irrevocably assigns all ownership rights in the policy to another. 
C) The payment of premiums on an insurance policy that is owned by another does not constitute a gift. 
D) The value of the gift of a life insurance policy is the amount it would cost to purchase a comparable policy on the date of the gift.

Question 9

Gift tax returns are filed on a calendar-year basis.

Accepted Answer

A) True 
 B)False

Question 10

George transfers property to an irrevocable trust for the benefit of his adult children and names himself as trustee.The trust document requires the trustee to distribute trust property to the beneficiaries at the trustee's discretion with the possibility of no distribution to certain beneficiaries as the trustee deems appropriate.The trust will terminate at the end of nine years,and the property will pass to George's children.Which of the following statements is correct?

Accepted Answer

A) The beneficiaries receive a present interest in the trust property when George transfers the assets to the trust. 
B) The transfer by George is eligible for the annual gift tax exclusion. 
C) George's transfer of property to the trust is not taxed under gift tax rules at the date of transfer. 
D) George's transfer of property to the trust is a gift of a future interest. 
A) The beneficiaries receive a present interest in the trust property when George transfers the assets to the trust. 
B) The transfer by George is eligible for the annual gift tax exclusion. 
C) George's transfer of property to the trust is not taxed under gift tax rules at the date of transfer. 
D) George's transfer of property to the trust is a gift of a future interest.

Question 11

Interest-free or below-market loans

Accepted Answer

A) must always have interest imputed on them. 
B) may result in treating the borrower as paying interest. 
C) result in treating the entire loan proceeds as a gift. 
D) will always result in at least $1,000 of interest income being imputed. 
A) must always have interest imputed on them. 
B) may result in treating the borrower as paying interest. 
C) result in treating the entire loan proceeds as a gift. 
D) will always result in at least $1,000 of interest income being imputed.

Question 12

What is a "net gift" and what is the potential income tax problem associated with making a net gift?

Accepted Answer

A potential donor who wants to freeze a

Question 13

A husband transfers $90,000 by gift directly to his wife.The marital deduction for the transfer is

Accepted Answer

A) $0 unless he elects to claim one. 
B) $90,000. 
C) $75,000. 
D) none of the above. 
A) $0 unless he elects to claim one. 
B) $90,000. 
C) $75,000. 
D) none of the above.

Question 14

Identify which of the following statements is true.

Accepted Answer

A) An individual making a qualified disclaimer can determine to whom the disclaimed property will pass. 
B) A qualified disclaimer must be made within six months after (a)the day the property is transferred,or (b)the day the person receiving the property becomes age 21,whichever is later. 
C) One of the tests that a qualified disclaimer must meet is that it must be an irrevocable,unqualified,written refusal to accept property. 
D) All of the above are false. 
A) An individual making a qualified disclaimer can determine to whom the disclaimed property will pass. 
B) A qualified disclaimer must be made within six months after (a)the day the property is transferred,or (b)the day the person receiving the property becomes age 21,whichever is later. 
C) One of the tests that a qualified disclaimer must meet is that it must be an irrevocable,unqualified,written refusal to accept property. 
D) All of the above are false.

Question 15

Identify which of the following statements is false.

Accepted Answer

A) A gift occurs when a revocable trust is funded. 
B) A gift does not occur until the transfer is complete. 
C) A transfer is incomplete (and not subject to the gift tax)if the donor retains the power to name new beneficiaries or to change the interests of the beneficiaries. 
D) Transfers to an irrevocable trust can be deemed incomplete. 
A) A gift occurs when a revocable trust is funded. 
B) A gift does not occur until the transfer is complete. 
C) A transfer is incomplete (and not subject to the gift tax)if the donor retains the power to name new beneficiaries or to change the interests of the beneficiaries. 
D) Transfers to an irrevocable trust can be deemed incomplete.

Question 16

Barbara sells a house with an FMV of $170,000 to her daughter for $120,000.From this transaction,Barbara is deemed to have made a gift (before the annual exclusion)of

Accepted Answer

A) $50,000. 
B) $170,000. 
C) $120,000. 
D) $0. 
A) $50,000. 
B) $170,000. 
C) $120,000. 
D) $0.

Question 17

In 1998,Delores made taxable gifts to her son of property with an FMV of $200,000.In the current year when Delores dies,the property is worth $800,000.The amount included in Delores's estate tax base because of the 1998 gift is

Accepted Answer

A) $0. 
B) $189,000. 
C) $200,000. 
D) $800,000. 
A) $0. 
B) $189,000. 
C) $200,000. 
D) $800,000.

Question 18

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

Accepted Answer

A) $0. 
B) $40,000. 
C) $80,000. 
D) $90,000. 
A) $0. 
B) $40,000. 
C) $80,000. 
D) $90,000.

Question 19

Which of the following statements is true?

Accepted Answer

A) Transfers to an irrevocable trust can be deemed incomplete due to powers retained by the grantor. 
B) If the donor retains the power to change the trust beneficiary,the gift is complete. 
C) Transfers to a revocable trust are completed gifts. 
D) All of the above are false. 
A) Transfers to an irrevocable trust can be deemed incomplete due to powers retained by the grantor. 
B) If the donor retains the power to change the trust beneficiary,the gift is complete. 
C) Transfers to a revocable trust are completed gifts. 
D) All of the above are false.

Question 20

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?

Accepted Answer

A) Tia made a $100,000 gift to Rick. 
B) Vonda makes a $100,000 gift to Rick. 
C) Tia has made a gift of $100,000 to Vonda. 
D) Exercising a general power of appointment constitutes a gift. 
A) Tia made a $100,000 gift to Rick. 
B) Vonda makes a $100,000 gift to Rick. 
C) Tia has made a gift of $100,000 to Vonda. 
D) Exercising a general power of appointment constitutes a gift.

Exam 12: The Gift Tax

Roger makes a $1,000,000 cash gift on January 1 of the current year,and dies on February 1 of the current year.Roger's gift tax return is due

Identify which of the following statements is true.

Identify which of the following statements is true.

Which of the following is a completed gift?

A split-interest gift transfer

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.

Identify which of the following statements is false.

Gift tax returns are filed on a calendar-year basis.

Interest-free or below-market loans

What is a "net gift" and what is the potential income tax problem associated with making a net gift?

A husband transfers $90,000 by gift directly to his wife.The marital deduction for the transfer is

Identify which of the following statements is true.

Identify which of the following statements is false.

Barbara sells a house with an FMV of $170,000 to her daughter for $120,000.From this transaction,Barbara is deemed to have made a gift (before the annual exclusion)of

In 1998,Delores made taxable gifts to her son of property with an FMV of $200,000.In the current year when Delores dies,the property is worth $800,000.The amount included in Delores's estate tax base because of the 1998 gift is

Which of the following statements is true?

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?

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