Question 1

The Federal transfer taxes are calculated using cumulative lifetime transfers.

Accepted Answer

A) True 
 B)False

Question 2

A future interest is a right to receive income or property in the future.

Accepted Answer

A) True 
 B)False

Question 3

This year Nathan transferred $2 million to an irrevocable trust established for the benefit of his nephew. The trustee is directed to accumulate income for the next 5 years before distributing the trust corpus to Nathan's nephew. In past years Nathan has made taxable gifts of $6 million and used an applicable credit on an exemption equivalent of $5 million. What amount of gift tax, if any, must Nathan remit?

Accepted Answer

A)  $345,450. 
B)  $620,000. 
C)  $400,000. 
D)  zero - there is a $10.98 million exemption equivalent. 
E)  None of the choices are correct. The amount of tax cannot be estimated without the use of a tax rate schedule. 
A)  $345,450. 
B)  $620,000. 
C)  $400,000. 
D)  zero - there is a $10.98 million exemption equivalent. 
E)  None of the choices are correct. The amount of tax cannot be estimated without the use of a tax rate schedule.

Question 4

The applicable credit is designed to allow a minimum amount of lifetime transferswithout triggering the imposition of a transfer tax.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Matthew and Addison are married and live in Michigan, a common-law state. For the holidays Addison gave cash gifts of $30,000 to each of her two sons, and Matthew gave$40,000 to his daughter. What is the amount of Addison's taxable gifts if Matthew andAddison opt to gift split?

Accepted Answer

A)  $16,000. 
B)  $8,000. 
C)  $58,000. 
D)  $4,000. 
E)  None of the choices are correct. 
A)  $16,000. 
B)  $8,000. 
C)  $58,000. 
D)  $4,000. 
E)  None of the choices are correct.

Question 7

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 $30,000 to her niece. What is the amount of Andrew's taxable gifts?

Accepted Answer

A)  $14,000. 
B)  $1,000. 
C)  $28,000. 
D)  zero if Andrew and Brianna elect to split gifts. 
E)  None of the choices are correct. 
A)  $14,000. 
B)  $1,000. 
C)  $28,000. 
D)  zero if Andrew and Brianna elect to split gifts. 
E)  None of the choices are correct.

Question 8

At his death Jose owned real estate worth $22 million but subject to a mortgage of $7 million. Which of the following is a true statement?

Accepted Answer

A)  $15 million is included in Jose's gross estate. 
B)  $22 million is included in Jose's gross estate. 
C)  The $7 million mortgage is not deductible if Jose's will transfers the property to a charity. 
D)  The $7 million mortgage must be paid by Jose's estate. 
E)  All of the choices are correct. 
A)  $15 million is included in Jose's gross estate. 
B)  $22 million is included in Jose's gross estate. 
C)  The $7 million mortgage is not deductible if Jose's will transfers the property to a charity. 
D)  The $7 million mortgage must be paid by Jose's estate. 
E)  All of the choices are correct.

Question 9

Jonathan transferred $90,000 of cash to a trust this year for the benefit of Hannah, age10. The trustee has the discretion to distribute income or corpus (principal) for Hannah's benefit and is required to distribute all assets to Hannah (or her estate) not later than Hannah's 21st birthday. What is the amount of the taxable gift?

Accepted Answer

A)  $64,000. 
B)  $90,000. 
C)  $76,000. 
D)  zero - there is no completed gift until the trustee makes a distribution from the trust. 
E)  None of the choices are correct. 
A)  $64,000. 
B)  $90,000. 
C)  $76,000. 
D)  zero - there is no completed gift until the trustee makes a distribution from the trust. 
E)  None of the choices are correct.

Question 10

This year, Brent by himself purchased season baseball tickets in the exclusive sky club.The price of the tickets was $60,000, and Brent divided the tickets equally with his two brothers (Brent gave one-third of the tickets to each brother). Has Brent made a taxable gift and, if so, in what amount?

Accepted Answer

A)  Brent made two taxable gifts of $6,000. 
B)  Brent made two taxable gifts of $17,000 each. 
C)  Brent made a taxable gift of $46,000. 
D)  Brent transferred the tickets for love and affection so no gift tax is imposed. 
E)  None of the choices are correct. 
A)  Brent made two taxable gifts of $6,000. 
B)  Brent made two taxable gifts of $17,000 each. 
C)  Brent made a taxable gift of $46,000. 
D)  Brent transferred the tickets for love and affection so no gift tax is imposed. 
E)  None of the choices are correct.

Question 11

Which of the following is a true statement?

Accepted Answer

A)  Serial gifts are limited in scope because only $10,000 can be transferred each year tax-free to any specific donee. 
B)  Leaving all property to the surviving spouse maximizes the marital deduction and therefore minimizes total transfer taxes on the estates of both spouses. 
C)  Serial gifts can move significant amounts of wealth only if employed by multiple donors. 
D)  A bypass provision in the will of the deceased spouse is designed to use the applicable credit of the deceased spouse by transferring property to beneficiaries other than the surviving spouse. 
E)  None of the choices are true. 
A)  Serial gifts are limited in scope because only $10,000 can be transferred each year tax-free to any specific donee. 
B)  Leaving all property to the surviving spouse maximizes the marital deduction and therefore minimizes total transfer taxes on the estates of both spouses. 
C)  Serial gifts can move significant amounts of wealth only if employed by multiple donors. 
D)  A bypass provision in the will of the deceased spouse is designed to use the applicable credit of the deceased spouse by transferring property to beneficiaries other than the surviving spouse. 
E)  None of the choices are true.

Question 12

A couple who is married at the time of completing a gift can elect to file a joint gift tax return.

Accepted Answer

A) True 
 B)False

Question 13

Last year Brandon opened a savings account with a deposit of $45,000. The account was in the name of Brandon and Melanie, joint tenancy with the right of survivorship. Melanie did notcontribute to the account, but this year she withdrew $18,000. Has Brandon made a taxable gift toMelanie, and if so, in what amount?

Accepted Answer

$4,000
No gift was made at the time of t

Question 14

Tracey is unmarried and owns $7 million in stock and bonds. What is the result if Tracey dies this year and leaves all of her property to a qualified charity?

Accepted Answer

A)  Tracey's taxable estate will be zero. 
B)  Tracey's gross estate will be zero. 
C)  Tracey's estate tax basis will be zero. 
D)  Tracey's estate will have a tentative estate tax of zero. 
E)  None of the choices are correct. 
A)  Tracey's taxable estate will be zero. 
B)  Tracey's gross estate will be zero. 
C)  Tracey's estate tax basis will be zero. 
D)  Tracey's estate will have a tentative estate tax of zero. 
E)  None of the choices are correct.

Question 15

Andrea transferred $500,000 of stock to a trust, with income to be paid to her niece for 20 years(value $125,000) and the remainder to her nephew (value $375,000). Andrea named a bank asindependent trustee but retained the power to determine how much income, if any, will be paid in any particular year. What is the amount of the taxable gift, if any? Explain your answer.

Accepted Answer

The taxable gift is

Question 16

Christian transferred $60,000 to an irrevocable trust for the benefit of his threedaughters. The three daughters share income equally for five years and then the corpus of the trust is to be divided equally between them. What is the amount of the taxable gifts,if any, made by Christian?

Accepted Answer

A)  $46,000. 
B)  $60,000. 
C)  $18,000. 
D)  $34,000. 
E)  None of the choices are correct - the amount of the taxable gifts cannot be ascertained without valuing each income interest. 
A)  $46,000. 
B)  $60,000. 
C)  $18,000. 
D)  $34,000. 
E)  None of the choices are correct - the amount of the taxable gifts cannot be ascertained without valuing each income interest.

Question 17

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.

Accepted Answer

A) True 
 B)False

Question 18

The generation-skipping tax is designed to accomplish which of the following?

Accepted Answer

A)  Prevent the avoidance of transfer taxes (both estate and gift tax) through transfers that skip a generation of recipients. 
B)  Eliminate the possibility that the estate tax can be avoided by gifts in contemplation of death. 
C)  Generate additional revenues to supplement the estate tax. 
D)  Replace the gift tax on distributions from trusts. 
E)  None of the choices are correct. 
A)  Prevent the avoidance of transfer taxes (both estate and gift tax) through transfers that skip a generation of recipients. 
B)  Eliminate the possibility that the estate tax can be avoided by gifts in contemplation of death. 
C)  Generate additional revenues to supplement the estate tax. 
D)  Replace the gift tax on distributions from trusts. 
E)  None of the choices are correct.

Question 19

The applicable credit is designed to:

Accepted Answer

A)  exclude up to $14,000 per individual per year on any individual transfer. 
B)  prevent taxation of cumulative transfers that do not exceed a certain minimum amount. 
C)  apply only to taxable transfers included in the gross estate. 
D)  apply to amounts not already eliminated by the exemption equivalent. 
E)  None of the choices are correct. 
A)  exclude up to $14,000 per individual per year on any individual transfer. 
B)  prevent taxation of cumulative transfers that do not exceed a certain minimum amount. 
C)  apply only to taxable transfers included in the gross estate. 
D)  apply to amounts not already eliminated by the exemption equivalent. 
E)  None of the choices are correct.

Question 20

At her death Emily owned real estate worth $2.5 million and other property worth $1 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?

Accepted Answer

A)  Emily's adjusted gross estate is $3.3 million. 
B)  Emily's estate tax base is $3.5 million. 
C)  Emily's taxable estate is $3.5 million. 
D)  Emily's gross estate is $3.3 million. 
E)  None of the choices are true. 
A)  Emily's adjusted gross estate is $3.3 million. 
B)  Emily's estate tax base is $3.5 million. 
C)  Emily's taxable estate is $3.5 million. 
D)  Emily's gross estate is $3.3 million. 
E)  None of the choices are true.

Exam 25: Transfer Taxes and Wealth Planning

The Federal transfer taxes are calculated using cumulative lifetime transfers.

A future interest is a right to receive income or property in the future.

The applicable credit is designed to allow a minimum amount of lifetime transferswithout triggering the imposition of a transfer tax.

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

Matthew and Addison are married and live in Michigan, a common-law state. For the holidays Addison gave cash gifts of $30,000 to each of her two sons, and Matthew gave$40,000 to his daughter. What is the amount of Addison's taxable gifts if Matthew andAddison opt to gift split?

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 $30,000 to her niece. What is the amount of Andrew's taxable gifts?

At his death Jose owned real estate worth $22 million but subject to a mortgage of $7 million. Which of the following is a true statement?

This year, Brent by himself purchased season baseball tickets in the exclusive sky club.The price of the tickets was $60,000, and Brent divided the tickets equally with his two brothers (Brent gave one-third of the tickets to each brother). Has Brent made a taxable gift and, if so, in what amount?

Which of the following is a true statement?

A couple who is married at the time of completing a gift can elect to file a joint gift tax return.

Tracey is unmarried and owns $7 million in stock and bonds. What is the result if Tracey dies this year and leaves all of her property to a qualified charity?

Christian transferred $60,000 to an irrevocable trust for the benefit of his threedaughters. The three daughters share income equally for five years and then the corpus of the trust is to be divided equally between them. What is the amount of the taxable gifts,if any, made by Christian?

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.

The generation-skipping tax is designed to accomplish which of the following?

The applicable credit is designed to:

At her death Emily owned real estate worth $2.5 million and other property worth $1 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?

An Introduction to Tax

Tax Compliance, the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Exemptions, and Filing Status

Gross Income and Exclusions

Individual Deductions

Investments

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Compensation

Retirement Savings and Deferred Compensation

Tax Consequences of Home Ownership

Entities Overview

Corporate Operations

Accounting for Income Taxes

Corporate Taxation: Nonliquidating Distributions

Corporate Formation, Reorganization, and Liquidation

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S Corporations

State and Local Taxes

The US Taxation of Multinational Transactions

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