Exam 14: Transfer Taxes and Wealth Planning

At his death in 2020, Nathan owned the following property: The real estate is subject to a $2,025,000 mortgage and Nathan made taxable gifts in 2009 totaling $3.8 million, at which time he offset the gift tax with an applicable credit (exemption equivalent of $3.8 million). Nathan has never been married. What is the amount of his estate tax due? (Use Exhibit 14-1.)

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?

Tracey is unmarried and owns $17 million in stock and bonds. What is the result if Tracey dies this year and leaves all of her property to a qualified charity?

Both spouses must consent to any gift-splitting election.

This year Anthony transferred $250,000 of bonds to a trust with directions to the trustee to pay income to his son for the next 20 years. After 20 years the trust corpus would revert to Anthony. Which of the following is a true statement?

An applicable credit is subtracted in calculating both the gift tax and the estate tax. Why doesn't this calculation have the effect of increasing the total applicable credit amount?

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?

This year Don and his son purchased real estate for an investment. The price of the property was $588,000, and the title named Don and his son as joint tenants with the right of survivorship. Don provided $344,000 of the purchase price and his son provided the remaining $244,000. Has Don made a taxable gift and, if so, in what amount?

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 $34,000 to her niece. What is the amount of Andrew's taxable gifts?

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?

The exemption equivalent was repealed in 2010.

The estate and gift taxes share several common features. Which of the following characteristics is common to both the estate and gift taxes?

At her death Emily owned real estate worth $2.5 million and other property worth $10 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?

Ryan placed $350,000 in trust with income to Stephen for his life and the remainder to Kayla (or her estate). At the time of the gift, given the prevailing interest rate, Stephen's life estate was valued at $185,000 and the remainder at $165,000. What is the amount, if any, of Ryan's taxable gifts?

At his death Titus had a gross estate consisting of $6 million of property. Which of the following is a true statement about Titus' estate or estate tax?

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?

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 14-1.)

The estate and gift taxes share several common features. Which of the following characteristics is common to both the estate and gift taxes?

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

The applicable credit is designed to allow a minimum amount of lifetime transfers without triggering the imposition of a transfer tax.