Exam 25: Transfer Taxes and Wealth Planning

This year Maria transferred $600,000 to an irrevocable trust that pays equal shares of income annually to four cousins (or their estates)for the next eight years. At that time, the trust is terminated and the corpus of the trust reverts to Maria. Determine the amount, if any, of the current gifts and the taxable gifts if the relevant interest rate is 6 percent and Maria is married and elects to gift-split with her spouse?

The gift-splitting election only applies to gifts made by taxpayers who reside in community-property states.

Gabriel had a taxable estate of $18.2 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.)

Christopher's residence was damaged by a storm during the administration of his estate. Christopher's executor paid $120,000 to repair the residence after the storm. Which of the following is a true statement?

The probate estate consists of all property owned by the decedent that is excluded from the gross estate.

Grace transferred $800,000 into trust with the income to be paid annually to her spouse, Isaiah, for life and the remainder to Taylor. Calculate the amount of the taxable gifts from the transfers.

The annual exclusion eliminates relatively small transfers of present interests in property.

The marital and charitable deductions are common to both the estate tax and the gift tax formulas.

Ricardo transferred $1,000,000 of cash to State University for a new sports complex. Calculate the amount of the taxable gift.

This year Samantha gave each of her three nephews birthday gifts of $10,000 in cash. At Christmas, Samantha gave each of her three nephews Christmas gifts of an additional $6,000 in cash. What is the amount of the taxable gifts, if any, made by Samantha this year?

A trust is a legal entity whose purpose is to hold and administer property for the benefit of beneficiaries.

Joshua and David purchased real property for $500,000 as equal tenants in common. Although they are listed as equal co-owners, Joshua was only able to provide $200,000 of the purchase price. David treated the additional $100,000 of his contribution to the purchase price as a gift to Joshua. If the property is worth $2.5 million at Joshua's death, what amount would be included in Joshua's estate?

Which of the following transactions would not utilize the "Section 7520 rate" to calculate the value of the transfer?

The gross estate will not include the value of clothes and other personal items owned by the decedent at the time of death.

This year Nicholas earned $500,000 and used it to purchase land in joint tenancy with a right of survivorship with Nevaeh. Has Nicholas made a taxable gift to Nevaeh and, if so, in what amount?

At his death Stanley owned real estate worth $448,050 with two other individuals as equal tenants in common. Stanley contributed $72,500 to the $145,000 total cost of the property. What amount, if any, is included in Stanley's gross estate?

In order for a transfer to be treated as a complete gift, the transfer must be irrevocably relinquished by the donor.

Ashley owns a whole-life insurance policy worth $25,000 that directs the insurance company to pay the beneficiary $500,000 on her death. Ashley pays the annual policy premiums and has the power to designate the beneficiary of the policy. What value of the policy, if any, would be included in Ashley's estate upon her death?

Sophia is single and owns the following property: Sophia owns the real property in joint tenancy with Daniel. They purchased the property several years ago for $3.4 million. Sophia was only able to provide $680,000 of the purchase price. If Sophia dies, what is the amount of her gross estate?

At her death Tricia owned a life insurance policy on her life that paid her daughter $500,000 upon her death. The policy was only valued at $25,000 prior to Tricia's death. What amount, if any, is included in Tricia's gross estate?