Exam 12: The Gift Tax

Identify which of the following statements is false.

Identify which of the following statements is true.

Contrast the Crummey trust with the Sec. 2503(c) trust.

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?

A Sec. "2503(c) trust"

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

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

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

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

Discuss the statutory exemptions from the gift tax.

Ed gives Steve land with an adjusted basis of $40,000 and an FMV of $90,000. Ed paid no gift tax. Ed then inherits the same land back from Steve at Steve's death eight months later. At Steve's death, the land is worth $120,000. Ed's basis in the land becomes

Kenny is thinking of making a substantial gift of stock to his fiancée, Maria. The wedding is scheduled for October 1 of the current year. Kenny already has exhausted his unified credit. He also is considering giving $26,000 cash this year to each of his three children by a previous marriage. What tax issues should Kenny consider with respect to the gifts he plans to make to Maria and his three children?

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 situations requires that a gift tax return be filed?

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

Yuli wants to help his adult grandson, Jerry, become a CPA. He pays all of Jerry's tuition this year, which totals $20,000. He also pays $9,000 for Jerry's room and board at school. Yuli makes the payments directly to the school. What are the gift tax consequences?

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

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?

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?

The purchase of a $20,000 engagement ring generates a taxable gift necessitating the filing of a gift tax return.