Exam 18: The Federal Gift and Estate Taxes

Two brothers, Sam and Bob, acquire real estate as equal tenants in common. Of the purchase price of $200,000, Sam furnished $80,000 while Bob provided the balance. If Sam dies first ten years later when the real estate is worth $600,000, his estate includes $240,000 as to the property.

A surviving spouse's share of the community property is not included in the deceased spouse's gross estate.

In community property states, not all property acquired after marriage by either spouse is community property.

Rachel owns an insurance policy on the life of Albert with Belle as the designated beneficiary. Upon Rachel's prior death, nothing regarding this policy is included in her gross estate.

Classify each statement appropriately -State income taxes accrued prior to death.

Which, if any, of the following is a correct statement regarding the filing of a gift tax return (Form 709)?

In 1985, Drew creates a trust with $1,000,000 of securities. Under the terms of the trust, Paula (Drew's wife) is granted a life estate with remainder to their children. Drew makes a QTIP election as to the trust. Drew dies in 1992 when the trust is worth $1,500,000, and Paula dies in 2015 when the trust is worth $2,000,000. Which, if any, of the following is a correct statement?

Classify each statement appearing below -Maggie purchased an insurance policy on Jim's life and designated Susan as the beneficiary. Four years later Jim dies, and Susan collects the insurance proceeds.

At the time of her death, Audrey was (or had been) involved in the following trust arrangements. As to these trusts, how much is included in Audrey's gross estate? ∙ Trust A. Created by Audrey ten years ago as a revocable trust with $1 million in assets. The trust provides for a life estate to Audrey, remainder to her children. Two years ago and when the trust was worth $5 million, Audrey released her power to revoke. When Audrey died, Trust A's assets are valued at $5.1 million. ∙ Trust B. Created by David's will (Audrey's late husband) and provides for a life estate to Audrey, remainder to her children. David's estate made a QTIP election. Trust B was worth $2 million when created and $3 million when Audrey died. ∙ Trust C. Created by Audrey five years ago, provides for a life estate to Audrey's children, remainder to their children (i.e., Audrey's grandchildren). Trust C was worth $1.5 million when created and $2.4 million when Audrey died.

Joint tenancies and tenancies by the entirety avoid probate, while tenancies in common and community property do not. Why?

Classify each of the independent statements appearing below -Ten cemetery lots purchased by decedent prior to death for use by himself and his family.

Match each statement with the correct choice. Some choices may be used more than once or not at all -Tenancy in common

When Travis learns he is seriously ill, he transfers an insurance policy on his life (maturity value of $2,000,000) to his wife Alexis. The couple's adult children are the designated beneficiaries of the policy. Has Travis acted wisely?

In arriving at the taxable estate, expenses incurred in administering community property are deductible only in proportion to the deceased spouse's interest in the community.

In the past, the amount of the unified tax credit always has been the same for both transfers by gift and transfers by death.

At the time of his death, Tom owned some common stock. ​ If the alternate valuation date is properly elected, the value of Tom's estate as to these stocks is:

At the time of her death, Amber owns property worth $5,000,000. Other information regarding her affairs is as follows. All of these items (except the casualty loss) were paid by her estate, and none were deducted on Form 1041 (income tax return of the estate). What is Amber's taxable estate?

Classify each statement appropriately -State death tax imposed on the estate.

In determining the Federal gift tax on a current gift:

In 2013, Katherine made some taxable gifts upon which she paid a Federal gift tax of $96,000. If Katherine dies in 2015, the $96,000 is included in her gross estate under the "gross up" rule.