Question 1

The gift tax is a wealth transfer tax that applies to transfers during a person's lifetime and transfers at death.

Accepted Answer

A) True 
 B)False

Question 2

Marilyn and Earl establish a trust benefiting their grandchild,Courtney,age 4.Courtney is to receive the accumulated income and corpus when she reaches age 30.In the year of the transfer,Courtney has a two-week period in which to request distributions.This trust is a

Accepted Answer

A) 2503(c)trust. 
B) Clifford trust. 
C) Crummey trust. 
D) none of the above. 
A) 2503(c)trust. 
B) Clifford trust. 
C) Crummey trust. 
D) none of the above.

Question 3

The computation of the gift tax liability for a current year

Accepted Answer

A) is made without reference to previous years. 
B) requires the use of current-year tax rates only. 
C) requires the use of different rates,depending on when the gifts were made. 
D) requires knowledge of the total gift taxes paid in previous years. 
A) is made without reference to previous years. 
B) requires the use of current-year tax rates only. 
C) requires the use of different rates,depending on when the gifts were made. 
D) requires knowledge of the total gift taxes paid in previous years.

Question 4

Identify which of the following statements is false.

Accepted Answer

A) If an individual transfers property in trust and reserves the right to the trust's income for life,the individual retains a life estate. 
B) An individual who receives a remainder interest will receive property after the death of the holder of a life estate. 
C) If a grantor transfers property in trust and names a beneficiary to receive only a term-certain interest and then the property is to return to the grantor,the transaction is not subject to gift tax. 
D) Life estates are valued using actuarial tables. 
A) If an individual transfers property in trust and reserves the right to the trust's income for life,the individual retains a life estate. 
B) An individual who receives a remainder interest will receive property after the death of the holder of a life estate. 
C) If a grantor transfers property in trust and names a beneficiary to receive only a term-certain interest and then the property is to return to the grantor,the transaction is not subject to gift tax. 
D) Life estates are valued using actuarial tables.

Question 5

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

Accepted Answer

A) $8,500. 
B) $9,000. 
C) $15,500. 
D) $20,500. 
A) $8,500. 
B) $9,000. 
C) $15,500. 
D) $20,500.

Question 6

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

Accepted Answer

A) $520,000. 
B) $260,000. 
C) $300,000. 
D) $220,000. 
A) $520,000. 
B) $260,000. 
C) $300,000. 
D) $220,000.

Question 7

Jack transfers property worth $250,000 to a revocable trust on January 1.Two-and-a-half years later,when the property is worth $300,000,the trust becomes irrevocable.Which of the following statements is correct?

Accepted Answer

A) A $300,000 gift occurs when the trust became irrevocable. 
B) A $250,000 gift occurs when the original transfer was made. 
C) A $250,000 gift occurs when the trust became irrevocable. 
D) Jack may elect which amount to report as a gift. 
A) A $300,000 gift occurs when the trust became irrevocable. 
B) A $250,000 gift occurs when the original transfer was made. 
C) A $250,000 gift occurs when the trust became irrevocable. 
D) Jack may elect which amount to report as a gift.

Question 8

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

Accepted Answer

A) $100,000. 
B) $60,000. 
C) $50,000. 
D) $0. 
A) $100,000. 
B) $60,000. 
C) $50,000. 
D) $0.

Question 9

Why are Crummey trusts popular for minors?

Accepted Answer

A) They are considered gifts of a future interest and allow the donor to take an exclusion. 
B) They are considered gifts of a present interest,permitting an annual gift tax exclusion. 
C) Crummey trusts require annual distributions to minors. 
D) Donors are only subject to the gift tax when funds are distributed from Crummey trusts. 
A) They are considered gifts of a future interest and allow the donor to take an exclusion. 
B) They are considered gifts of a present interest,permitting an annual gift tax exclusion. 
C) Crummey trusts require annual distributions to minors. 
D) Donors are only subject to the gift tax when funds are distributed from Crummey trusts.

Question 10

In the current year,Bonnie,who is single,sells stock valued at $60,000 to Linda for $15,000.Later that year,Bonnie gives Linda $25,000 in cash.Bonnie's taxable gifts from these transfers total

Accepted Answer

A) $70,000. 
B) $59,000. 
C) $55,000. 
D) $25,000. 
A) $70,000. 
B) $59,000. 
C) $55,000. 
D) $25,000.

Question 11

In November 1976,Grant uses $30,000 of the specific exemption available at that time.The unified credit available to Grant for post-1976 transfers is reduced by

Accepted Answer

A) $0. 
B) $6,000. 
C) $15,000. 
D) $30,000. 
A) $0. 
B) $6,000. 
C) $15,000. 
D) $30,000.

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A) no loss. 
B) a $4,000 loss. 
C) a $14,000 loss. 
D) none of the above 
A) no loss. 
B) a $4,000 loss. 
C) a $14,000 loss. 
D) none of the above

Question 14

Identify which of the following statements is false.

Accepted Answer

A) The gift-splitting election will apply to all transfers made during the portion of any year that the spouses electing gift splitting are married to each other. 
B) The gift-splitting election is made separately on each gift either spouse makes. 
C) Making gifts during one's lifetime helps to reduce the amount of estate taxes owed at death. 
D) In order to use gift splitting,both spouses must be U.S.citizens or residents at the time of the transfer. 
A) The gift-splitting election will apply to all transfers made during the portion of any year that the spouses electing gift splitting are married to each other. 
B) The gift-splitting election is made separately on each gift either spouse makes. 
C) Making gifts during one's lifetime helps to reduce the amount of estate taxes owed at death. 
D) In order to use gift splitting,both spouses must be U.S.citizens or residents at the time of the transfer.

Question 15

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

Accepted Answer

A) $200,000. 
B) $24,000. 
C) $12,000. 
D) $0. 
A) $200,000. 
B) $24,000. 
C) $12,000. 
D) $0.

Question 16

A "Crummey demand power" in a trust document allows the donor to demand a distribution from the trust in years in which earnings exist within the trust.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following transfers is subject to the gift tax?

Accepted Answer

A) Matilda contributes $5,000 to a Senate candidate's political organization. 
B) Frank gives $30,000 to a lobbying group promoting stricter environmental regulations. 
C) Julia establishes a trust benefiting her nieces and nephews.Julia will determine the amount of any distributions made. 
D) Lance purchases land,titling it in the names of Lance and Sheryl,joint owners. 
A) Matilda contributes $5,000 to a Senate candidate's political organization. 
B) Frank gives $30,000 to a lobbying group promoting stricter environmental regulations. 
C) Julia establishes a trust benefiting her nieces and nephews.Julia will determine the amount of any distributions made. 
D) Lance purchases land,titling it in the names of Lance and Sheryl,joint owners.

Question 18

In 2018,Letty makes taxable gifts totaling $4 million.Her only other taxable gifts amount to $1 million,all of which were made in 2012.What is Letty's 2018 gift tax liability before the unified credit?

Accepted Answer

A) $2,220,800 
B) $1,875,000 
C) $1,840,800 
D) $1,600,000 
A) $2,220,800 
B) $1,875,000 
C) $1,840,800 
D) $1,600,000

Exam 12: The Gift Tax

The gift tax is a wealth transfer tax that applies to transfers during a person's lifetime and transfers at death.

Marilyn and Earl establish a trust benefiting their grandchild,Courtney,age 4.Courtney is to receive the accumulated income and corpus when she reaches age 30.In the year of the transfer,Courtney has a two-week period in which to request distributions.This trust is a

The computation of the gift tax liability for a current year

Identify which of the following statements is false.

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

Jack transfers property worth $250,000 to a revocable trust on January 1.Two-and-a-half years later,when the property is worth $300,000,the trust becomes irrevocable.Which of the following statements is correct?

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

Why are Crummey trusts popular for minors?

In the current year,Bonnie,who is single,sells stock valued at $60,000 to Linda for $15,000.Later that year,Bonnie gives Linda $25,000 in cash.Bonnie's taxable gifts from these transfers total

In November 1976,Grant uses $30,000 of the specific exemption available at that time.The unified credit available to Grant for post-1976 transfers is reduced by

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

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 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

A "Crummey demand power" in a trust document allows the donor to demand a distribution from the trust in years in which earnings exist within the trust.

Which of the following transfers is subject to the gift tax?

In 2018,Letty makes taxable gifts totaling $4 million.Her only other taxable gifts amount to $1 million,all of which were made in 2012.What is Letty's 2018 gift tax liability before the unified credit?

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