Exam 18: The Federal Gift and Estate Taxes

Stacey inherits unimproved land (fair market value of $6 million) from her father on June 1, 2015. Stacey disclaims her interest in the property as follows: one-third on December 1, 2015; one-third on January 3, 2016; and the remaining one-third on May 31, 2016. In all cases, the disclaimers pass the interest to her son (the next heir under state law). The Federal gift tax applies to Stacey for:

Transfers to political organizations are exempt from the application of the Federal gift tax.

Cole purchases land for $500,000 and transfers it by gift to his two daughters, Madison and Paige, as equal joint tenants with the right of survivorship. Ten years later, when the land is worth $2,000,000, Madison predeceases Paige. Madison's executor includes none of the value of the land in her gross estate, as she contributed nothing toward its cost. Do you agree?

Match each statement with the correct choice. Some choices may be used more than once or not at all. -State income tax refund received after death on a tax return filed before death.

June made taxable gifts as follows: $200,000 in 1977, $600,000 in 1985, and $700,000 in 2001. In 2016, June dies leaving a taxable estate of $4,000,000. June's tax base for applying the unified tax rate schedules (for estate tax purposes) is:

Which, if any, of the following is not a characteristic of the Federal estate tax?

Match each statement with the correct choice. Some choices may be used more than once or not at all. -Howard establishes a trust, life estate to his children, remainder to the grandchildren. Under its terms, the trust is revocable by Howard.

Brad holds a life estate in a trust created by his father, while Scott holds a life estate in a trust created by himself. Upon their deaths, Scott must include the trust in his gross estate, while Brad need not include his trust. Why?

Prior to her death in 2016, Alma made the following gifts. Fair Market Value Year Asset Date of Gift Date of Death 2007 Marketable securities \ 400,000 \ 900,000 2014 Term life insurance policy -0- 100,000 2014 Unimproved land 900,000 950,000 As a result of the 2014 transfer, Alma paid a gift tax of $70,000. As to these transactions, Alma's gross estate includes:

Ray purchases U.S. savings bonds which he lists as "Ray and Donna" as co-owners. Donna is Ray's daughter. Donna predeceases Ray. No gift or estate tax consequences result from this situation.

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?

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

Sandy pays a local college for her non-dependent boyfriend's tuition. The payment is subject to the Federal gift tax.

Peggy gives $200,000 to her grandson. This is an example of a direct skip for purposes of the GSTT (generation-skipping transfer tax).

Match each statement with the correct choice. Some choices may be used more than once or not at all. -Decedent holds a life estate in a trust created by her spouse who died five years ago. The executor of the spouse's estate made a QTIP election as to the trust. Decedent's son is the remainderman of the trust.

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

To make the election to split gifts under § 2513, spouses must file a Form 709 (Federal gift tax return).

As a result of an auto accident from which she later died, Irene totaled a Bentley worth $95,000. If the insurance company covers $60,000 of the loss, Irene's estate can claim a casualty loss of $35,000 in arriving at the taxable estate.

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

Match each statement with the correct choice. Some choices may be used more than once or not at all. -Using his own funds, Horace establishes a savings account designating ownership as follows: "Horace and Nadine as joint tenants with right of survivorship." Nadine predeceases Horace.