Exam 18: The Federal Gift and Estate Taxes

Classify each statement appearing below -Harry pays for the tuition for his niece to attend Drake University. The niece does not qualify as Harry's dependent.

In 2015, grandparents contribute jointly owned funds to a § 529 qualified tuition plan on behalf of their granddaughter. The maximum annual exclusion allowed to them is $140,000 ($28,000 × 5 years).

In his will, Hernando provides for $50,000 to go to the Madrid, Spain, school system. Because it is a foreign charity, the bequest will not qualify as a charitable deduction for estate tax purposes.

In which, if any, of the following independent situations has Trent made a gift?

Gerald and Pat are husband and wife and live in New York. In 2005, they purchase an insurance policy (joint ownership) on Gerald's life and designate their daughter, Marie, as the beneficiary. The policy has a maturity value of $4,000,000 and lists ownership as tenants in common. Gerald dies first in 2015 and the insurance proceeds are paid to Marie. As to the proceeds:

For both the Federal gift and estate tax, a deduction is allowed for certain transfers to a spouse.

The election of the alternate valuation date can affect the amount of a charitable deduction allowed to an estate for a bequest to a qualified charity.

A lifetime transfer that is supported by full and adequate consideration is not a gift.

Prior to her death in 2015, Alma made the following gifts. As a result of the 2013 transfer, Alma paid a gift tax of $70,000. As to these transactions, Alma's gross estate includes:

Classify each statement appearing below -Homer purchases a U.S. savings bond listing title as: "Homer, payable to Bernice upon Homer's death." Bernice is Homer's sister.

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

Eric dies at age 96 and is survived by his third wife, Monique (age 22), and a granddaughter, Paula (age 50). Eric's will divides his $11 million estate between these two survivors. Both of these transfers are subject to the generation skipping transfer tax (GSTT).

At one point, the tax rates applicable to transfers by gift were lower than those applying to transfers by death.

At the time of her death, Megan was involved in the following. ∙ Owned an insurance policy on the life of her father with a replacement cost of $250,000 and maturity value of $800,000. The designated beneficiary of the policy is Megan's estate. ∙ Was an equal tenant in common with her brother in a tract of land worth $800,000. The land was inherited from their grandmother 10 years ago when it had a value of $200,000. ∙ Was a joint tenant with her two sisters in stock worth $1,500,000. The stock was inherited from their grandmother 10 years ago when it had a value of $500,000. As to these transactions, Megan's gross estate must include:

By his will, all of Rusty's property passes outright to his wife, Patsy. As Patsy was not given a general power of appointment or Rusty's executor did not make a QTIP election, Rusty's estate is not allowed a marital deduction.

Classify each statement appropriately -Selling expenses incurred to sell estate assets in order to pay administration expenses.

Sam purchases a U.S. savings bond which he registers as follows: "Sam, payable to Don upon Sam's death." A gift occurs when Sam purchases the bond.

Some states impose inheritance taxes, but the Federal tax system does not.

At the time of Clint's death, part of his estate consists of the following. ∙ Roth IRA (value of $1,000,000) with Jennifer as the designated beneficiary. ∙ Land (worth $3,000,000) held in joint tenancy with Jennifer. Jennifer is Clint's wife and originally furnished the purchase price. ∙ Building (worth $3,000,000) held as equal tenants in common with Jennifer and Dana. Dana is Clint's mother, and she originally purchased the property. Under Clint's will, all of his property passes to his wife, Jennifer. How much marital deduction is Clint's estate allowed? Clint and Jennifer live in Tennessee.

Classify each statement appropriately -Transportation cost for decedent and surviving son to site of burial.