Exam 14: Transfer Taxes and Wealth Planning

The testamentary transfer of property to a qualified charity is deductible in calculating the taxable estate without any ceiling limitation.

At her death Serena owned real estate worth $216,750 with her spouse in joint tenancy with the right of survivorship. Serena contributed $72,250 to the original cost of the property and her spouse contributed the remaining $144,500. What amount, if any, is included in Serena's gross estate?

A transfer of a terminable interest will not generally qualify for a marital deduction.

Alexis transferred $413,000 to a trust with directions to pay income to her spouse, William, for his life. After William's death the corpus of the trust will pass to William's son. If the life estate is valued at $79,500, what is the total amount of the taxable gifts?

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

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?

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

A present interest is the right to currently enjoy property or receive income payments from property.

This year Nicholas earned $536,000 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?

Ethan owned a vacation home at the time of his death. Which of the following is a true statement if Ethan was married to Emma and resided in a common-law state at the time of his death?

A bypass provision in a will requires a decedent to have a taxable estate in order to use an applicable credit to reduce total estate taxes on a married couple.

Isaac is married and Isaac and his spouse agree that they want to transfer the maximum amount of cash to each of their four children and six grandchildren. How much cash in total can Isaac and his spouse transfer to his children and grandchildren each year without creating any taxable gifts?

Including adjusted taxable gifts in the taxable estate causes these gifts to be taxed twice, once under the gift tax and again under the estate tax.

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

The tax on cumulative taxable gifts is reduced by the applicable credit regardless of whether any applicable credit was used in prior years.

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

The tax rate schedule on taxable transfers has a maximum tax rate of 40percent.

Which of the following is a true statement?

This year Evelyn created an irrevocable trust to provide for Ed, her 32-year-old nephew, and Ed's family. Evelyn transferred $150,000 to the trust and named a bank as the trustee. The trust was directed to pay income to Ed until he reaches age 35 (three years from now), and at that time the trust is to be terminated and the corpus is to be distributed to Ed's two children (or their estates). Determine the amount, if any, of the taxable gift. The relevant interest rate is 6 percent. (Round your intermediate calculation to three decimal places.)

Eric has $5.8 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 $6.38 million. Ignore the time value of money in your calculation. (Use Exhibit 14-1.)