Question 1

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

Accepted Answer

A) Some or all of the asset is included in the decedent’s gross estate. 
B) None of the asset is included in the decedent’s gross estate. 
A) Some or all of the asset is included in the decedent’s gross estate. 
B) None of the asset is included in the decedent’s gross estate. B

Question 2

Classify each of the following statements.
-Homer purchases a U.S. savings bond listing title as: "Homer, payable to Bernice upon Homer's death." Bernice is Homer's sister. Homer dies four years later, and Bernice cashes in the bond and keeps the proceeds.

Accepted Answer

A) No taxable transfer occurs. 
B) Gift tax applies. 
C) Estate tax applies. 
A) No taxable transfer occurs. 
B) Gift tax applies. 
C) Estate tax applies. C

Question 3

At the time of her death, Emma still owed $36,000 on her church pledge for the year. Because church pledges are not an enforceable obligation in the state where Emma resided, her estate cannot claim a deduction for the $36,000 that it owes and later pays.

Accepted Answer

A) True 
 B)False  False

Question 4

Lily pays for her grandson's college expenses. Under what conditions might such payments not constitute a gift?

Accepted Answer

Lily's grandson might be her dependent a

Question 5

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

Accepted Answer

A) In the current year, Debby, a widow, dies. Two years ago she inherited a large amount of wealth from her brother. 
B) Death does not defeat an owner's interest in property. 
C) Exists only if husband and wife are involved. 
D) A type of state tax on transfers by death. 
E) Must decrease the amount of the gross estate.
F)Annual exclusion not allowed.
G)Cumulative in effect.
H)Right of survivorship present as to type of ownership.
I)Overrides the terminable interest rule of the marital deduction.
J)Exemption equivalent.
K)Bypass amount.
L)No correct match provided. 
A) In the current year, Debby, a widow, dies. Two years ago she inherited a large amount of wealth from her brother. 
B) Death does not defeat an owner's interest in property. 
C) Exists only if husband and wife are involved. 
D) A type of state tax on transfers by death. 
E) Must decrease the amount of the gross estate.
F)Annual exclusion not allowed.
G)Cumulative in effect.
H)Right of survivorship present as to type of ownership.
I)Overrides the terminable interest rule of the marital deduction.
J)Exemption equivalent.
K)Bypass amount.
L)No correct match provided.

Question 6

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

Accepted Answer

A)  He established an irrevocable trust, income payable to himself for life and, upon his death, remainder to his children. 
B)  He dies owning a U.S. savings bond with ownership listed as: "Trent, payable to Sue on Trent's death." Sue redeems the bond. 
C)  He sends $25,000 to Alice's oral surgeon in payment of her dental implants. Alice is Trent's sister and does not qualify as his dependent. 
D)  He pays Eva $800,000 in a property settlement of her marital rights. One month later, Trent and Eva are divorced. 
A)  He established an irrevocable trust, income payable to himself for life and, upon his death, remainder to his children. 
B)  He dies owning a U.S. savings bond with ownership listed as: "Trent, payable to Sue on Trent's death." Sue redeems the bond. 
C)  He sends $25,000 to Alice's oral surgeon in payment of her dental implants. Alice is Trent's sister and does not qualify as his dependent. 
D)  He pays Eva $800,000 in a property settlement of her marital rights. One month later, Trent and Eva are divorced.

Question 7

Classify each of the following statements.
-Howard establishes a trust, life estate to his children, remainder to the grandchildren. Under its terms, the trust is revocable by Howard. Howard later relinquishes the right to revoke the trust.

Accepted Answer

A) No taxable transfer occurs. 
B) Gift tax applies. 
C) Estate tax applies. 
A) No taxable transfer occurs. 
B) Gift tax applies. 
C) Estate tax applies.

Question 8

Harry and Brenda are husband and wife. Using his funds, Harry purchases real estate that he lists as: "Harry and Brenda, tenants by the entirety with right of survivorship." If Brenda dies first, none of the real estate is included in her gross estate.

Accepted Answer

A) True 
 B)False

Question 9

Daniel and Mia acquired realty for $2 million with Daniel furnishing $1.5 million of the purchase price and Mia providing the balance. Title to the property is listed as: "Daniel and Mia, joint tenants with right of survivorship." This year Mia dies before Daniel when the realty is worth $4 million. How much is included in Mia's gross estate under the following circumstances?
a. Daniel and Mia are brother and sister.
b. Daniel and Mia are husband and wife.

Accepted Answer

a. $1,000,000. (25%

Question 10

At the time of her death, Megan: ∙ 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 earlier when it had a value of $500,000.
As to these transactions, Megan's gross estate must include:

Accepted Answer

A)  $250,000. 
B)  $1,150,000. 
C)  $1,400,000. 
D)  $2,150,000. 
A)  $250,000. 
B)  $1,150,000. 
C)  $1,400,000. 
D)  $2,150,000.

Question 11

Manuel, a citizen and resident of Argentina, makes a gift of a ranch located in Colorado to his children. Manuel is subject to the U.S. gift tax.

Accepted Answer

A) True 
 B)False

Question 12

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.

Accepted Answer

A) True 
 B)False

Question 13

At the time of his death, Leroy owed Federal income taxes on income earned in a prior year. Leroy's estate can claim an estate tax deduction for the income tax it pays.

Accepted Answer

A) True 
 B)False

Question 14

Stacey inherits unimproved land (fair market value of $6 million) from her father on June 1, 2019. She disclaims her interest in the property as follows: one-third on December 1, 2019; one-third on January 3, 2020; and the remaining one-third on May 31, 2020. 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:

Accepted Answer

A)  All of the disclaimers. 
B)  The disclaimer made in 2019. 
C)  The May 31, 2020 disclaimer. 
D)  All of the disclaimers made in 2020. 
E)  None of the disclaimers. 
A)  All of the disclaimers. 
B)  The disclaimer made in 2019. 
C)  The May 31, 2020 disclaimer. 
D)  All of the disclaimers made in 2020. 
E)  None of the disclaimers.

Question 15

Which, if any, of the following items is subject to indexation (adjusted to reflect inflation)?

Accepted Answer

A)  The election to split gifts under § 2513. 
B)  The limitation placed on the amount allowed as a charitable contribution for estate tax purposes (§ 2055). 
C)  Annual gift tax exclusion. 
D)  Unified transfer tax rates. 
A)  The election to split gifts under § 2513. 
B)  The limitation placed on the amount allowed as a charitable contribution for estate tax purposes (§ 2055). 
C)  Annual gift tax exclusion. 
D)  Unified transfer tax rates.

Question 16

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

Accepted Answer

A) Deductible from the gross estate in arriving at the taxable estate. 
B) Not deductible from the gross estate in arriving at the taxable estate. 
A) Deductible from the gross estate in arriving at the taxable estate. 
B) Not deductible from the gross estate in arriving at the taxable estate.

Question 17

Classify each of the following statements.
-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.

Accepted Answer

A) No taxable transfer occurs. 
B) Gift tax applies. 
C) Estate tax applies. 
A) No taxable transfer occurs. 
B) Gift tax applies. 
C) Estate tax applies.

Question 18

At the time of his death, Norton was involved in the following: ∙ Owned land in joint tenancy with Emily. The land is worth $600,000 and was purchased by
Norton 15 years ago for $150,000.
∙ Owned land in a tenancy by the entirety with his wife Amy. The land is worth $800,000 and was purchased by Norton five years ago for $450,000.
∙ Owned land in an equal tenancy in common with Noah. The land is worth $400,000 and was purchased by Norton four years ago for $300,000.
∙ Owned City of Dayton bonds worth $500,000. What amount is included in Norton's gross estate?

Accepted Answer

A)  $900,000 
B)  $1,100,000 
C)  $1,700,000 
D)  $2,100,000 
A)  $900,000 
B)  $1,100,000 
C)  $1,700,000 
D)  $2,100,000

Question 19

Mark dies on March 6. Which, if any, of the following items is not included in his gross estate?

Accepted Answer

A)  Interest earned (before death) on City of Cleveland bonds. 
B)  Cash dividend on stock owned by Mark-declaration date was February 4, and record date was March 4. 
C)  Federal income tax refund for a prior tax year-received on March 5. 
D)  Insurance recovery on auto accident that occurred on February 25. 
E)  Insurance recovery from theft of sailboat on March 7. 
A)  Interest earned (before death) on City of Cleveland bonds. 
B)  Cash dividend on stock owned by Mark-declaration date was February 4, and record date was March 4. 
C)  Federal income tax refund for a prior tax year-received on March 5. 
D)  Insurance recovery on auto accident that occurred on February 25. 
E)  Insurance recovery from theft of sailboat on March 7.

Question 20

The essential purpose of the marital deduction is to defer any estate tax liability until the second spouse dies.

Accepted Answer

A) True 
 B)False

Exam 27: The Federal Gift and Estate Taxes

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

Classify each of the following statements. -Homer purchases a U.S. savings bond listing title as: "Homer, payable to Bernice upon Homer's death." Bernice is Homer's sister. Homer dies four years later, and Bernice cashes in the bond and keeps the proceeds.

At the time of her death, Emma still owed $36,000 on her church pledge for the year. Because church pledges are not an enforceable obligation in the state where Emma resided, her estate cannot claim a deduction for the $36,000 that it owes and later pays.

Lily pays for her grandson's college expenses. Under what conditions might such payments not constitute a gift?

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

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

Classify each of the following statements. -Howard establishes a trust, life estate to his children, remainder to the grandchildren. Under its terms, the trust is revocable by Howard. Howard later relinquishes the right to revoke the trust.

Harry and Brenda are husband and wife. Using his funds, Harry purchases real estate that he lists as: "Harry and Brenda, tenants by the entirety with right of survivorship." If Brenda dies first, none of the real estate is included in her gross estate.

Manuel, a citizen and resident of Argentina, makes a gift of a ranch located in Colorado to his children. Manuel is subject to the U.S. gift tax.

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.

At the time of his death, Leroy owed Federal income taxes on income earned in a prior year. Leroy's estate can claim an estate tax deduction for the income tax it pays.

Which, if any, of the following items is subject to indexation (adjusted to reflect inflation)?

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

Classify each of the following statements. -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.

Mark dies on March 6. Which, if any, of the following items is not included in his gross estate?

The essential purpose of the marital deduction is to defer any estate tax liability until the second spouse dies.

Understanding and Working With the Federal Tax Law

Working With the Tax Law

Computing the Tax

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: in General

Deductions and Losses: Certain Business Expenses and Losses

Depreciation, Cost Recovery, Amortization, and Depletion

Deductions: Employee and Self-Employed-Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Tax Credits and Payments

Property Transactions: Determination of Gain or Loss, Basis Considerations, and Nontaxable Exchanges

Property Transactions: Capital Gains and Losses, Section 1231, and Recapture Provisions

Taxing Business Income

Accounting Periods and Methods

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Distributions Not in Complete Liquidation

Corporations: Distributions in Complete Liquidation and an Overview of Reorganizations

Partnerships

S Corporations

Exempt Entities

Multistate Corporate Taxation

Taxation of International Transactions

Tax Practice and Ethics

Income Taxation of Trusts and Estates

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