Exam 14: Transfer Taxes and Wealth Planning

This year Anthony transferred $250,000 of bonds to a trust with directions to the trustee to pay income to his son for the next 20 years. After 20 years the trust corpus would revert to Anthony. Which of the following is a true statement?

Ricardo transferred $1,000,000 of cash to State University for a new sports complex. Calculate the amount of the taxable gift.

The debts of the decedent at the time of death are deducted in calculating the taxable estate.

A bypass provision in a will requires a decedent to have a taxable estate in order to use an applicable credit to reduce total estate taxes on a married couple.

Adjusted taxable gifts are included when calculating the taxable estate but are not subject to double taxation because a tax credit is provided for taxes payable on adjusted taxable gifts.

The executor of Isabella's estate incurred administration expenses of $32,000 and paid $5,000 in funeral expenses. The executor charged the estate for $24,000 in fees. What is the maximum amount Isabella's estate can deduct in computing the adjusted gross estate?

Tracey is unmarried and owns $17 million in stock and bonds. What is the result if Tracey dies this year and leaves all of her property to a qualified charity?

The annual exclusion eliminates relatively small transfers of present interests in property.

Which of the following is a true statement about the federal gift tax return (Form 709)?

The gross estate includes the value of half of real property owned by a decedent and spouse in joint tenancy with the right of survivorship.

Aiden transferred $2 million to an irrevocable trust with income to Valeria for her life and the remainder to Jocelyn (or her estate). Calculate the value of the remainder and the life estate if Valeria's age and the prevailing interest rate result in a Table S discount factor for the remainder of 0.47.

Madison was married at the time of her death and her gross estate consisted of $22 million in stock and bonds. Madison left all of her property to her spouse. What is the result?

The gift tax is imposed on inter vivos (lifetime) transfers.

Andrew and Brianna are married and live in Texas, a community-property state. For their birthdays this year Andrew gave cash gifts of $20,000 to each of his two daughters, and Brianna gave $34,000 to her niece. What is the amount of Andrew's taxable gifts?

In order for a transfer to be treated as a complete gift, the transfer must be irrevocably relinquished by the donor.

At her death Emily owned real estate worth $2.5 million and other property worth $10 million. Property taxes of $200,000 were accrued on the real estate at the time of Emily's death. Which of the following is a true statement with respect to these items without considering any other owned property?

The probate estate consists of all property owned by the decedent that is excluded from the gross estate.

A gratuitous transfer of cash made directly to an individual who uses the entire amount of the cash to pay medical expenses is not subject to a gift tax.

Proceeds of life insurance paid to the decedent's estate due to the death of the decedent are included in the decedent's gross estate even if the decedent had no ownership rights in the policy at the time of death.

The annual exclusion applies to cumulative gifts made to each donee over the course of the year.