Exam 25: Transfer Taxes and Wealth Planning

Eric has $5 million of property that he wants to leave to his four children. He is considering making a current gift of the property (rather than leaving the property to pass through his will). Eric has made many prior taxable gifts, and additional taxable transfers will be subject to the highest transfer tax rate. Determine how much estate tax Eric will save if he gifts the property now and survives at least three years, during which time the property appreciates to $5.5 million. Ignore the time value of money in your calculation. (Use Exhibit 25-1.)

This year Alex's friend Kimberly was disabled. Alex paid $30,000 to Kimberly's doctor for medical expenses. In addition, Alex also paid $25,000 to Kimberly directly so that her son could afford tuition at State University this year. Has Alex made taxable gifts, and if so, in what amounts?

Jayden gave Olivia a ring when she agreed to marry him. The ring is a family heirloom valued at $68,000. What is the amount of the taxable gift?

This year Carlos and Hailey purchased realty for $480,000 and took title as equal tenants in common. However, Hailey was able to provide only $200,000 of the purchase price and Carlos paid the remaining $280,000. Has Carlos made a taxable gift to Hailey, and if so, in what amount?

Life insurance is an asset that can be used to fund a trust to support a surviving spouse and yet may not be included in the decedent's gross estate.

Which of the following is a true statement?

The exemption equivalent was repealed in 2010.

At his death Stanley owned real estate worth $345,000 with two other individuals as equal tenants in common. Stanley contributed $50,000 to the $100,000 total cost of the property. What amount, if any, is included in Stanley's gross estate?

The executor of Isabella's estate incurred administration expenses of $32,000 and paid $5,000 in funeral expenses. The executor charged the estate for $24,000 in fees. What is the maximum amount Isabella's estate can deduct in computing the adjusted gross estate?

Andrew and Brianna are married and live in Texas, a community-property state. For their birthdays this year Andrew gave cash gifts of $23,900 to each of his two daughters, and Brianna gave $39,200 to her niece. What is the amount of Andrew's taxable gifts?

Angel and Abigail are married and live in a common-law state. Angel and Abigail own a parcel of realty as joint tenants with the right of survivorship. In addition, Abigail owns another parcel of realty in her name alone. If Abigail should die when the jointly owned realty is worth $1.6 million and her own parcel of realty is worth $2.6 million, what is the total value of realty that would be included in Abigail's gross estate?

The probate estate will include the total value of all real property owned by the decedent at the time of death regardless of whether the decedent co-owned the property asa tenant in common or asa joint tenant with the right of survivorship.

Last year Brandon opened a savings account with a deposit of $45,000. The account was in the name of Brandon and Melanie,who have joint tenancy with the right of survivorship. Melanie did not contribute to the account, but this year she withdrew $18,000. Has Brandon made a taxable gift to Melanie, and if so, in what amount?

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

A transfer of cash to a bank account held in joint tenancy with the right of survivorship is not a complete gift.

The gross estate includes the value of half of real property owned by a decedent and spouse in joint tenancy with the right of survivorship.

Only complete gifts are subject to the federal gift tax.

Gabriel had a taxable estate of $16 million when he died in 2020. Calculate the amount of estate tax due (if any)if Gabriel made prior taxable gifts in 2005 totaling $1 million, at which time he claimed an applicable credit of $1 million and paid no tax. Gabriel was unmarried at his death. (Use Exhibit 25-1.)

A terminable interest in property is any interest that terminates during the current year.

For the holidays, Samuel gave a necklace worth $33,750 to Jennifer and jewelry worth $53,000 to Savannah. Samuel is married to Wendy and they live in a community-property state. Has Samuel made any taxable gifts and, if so, in what amounts?