Exam 14: Transfer Taxes and Wealth Planning

Harold and Mary are married and live in a community property state. During the marriage Harold bought a parcel of real estate for $100,000 in community funds and titled the property in his name alone. Mary died on January 30ᵗʰ of this year and was survived by Harold who did not remarry. The parcel of real property was worth $250,000 on January 30ᵗʰ of this year but was only worth $220,000 at year end. What amount, if any, is included in Mary's gross estate?

Which of the following statements is (are) True for both gratuitous and testamentary transfers?

No deductions are allowed when calculating the taxable estate.

A gratuitous transfer of cash made directly to an individual who uses the entire amount of the cash to pay medical expenses is not subject to a gift tax. 

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?

At her death Siena owned real estate worth $200,000 that was titled with her sister in joint tenancy with the right of survivorship. Siena contributed $50,000 to the total cost of the property and her sister contributed the remaining $75,000. What amount, if any, is included in Siena's gross estate?

The tax rate schedule on taxable transfers has a maximum tax rate of 40% for 2018.

A gift tax return does not need to be filed unless the taxpayer has made current gifts in excess of the applicable credit.

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

Ryan placed $280,000 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 $165,000 and the remainder at $115,000. What is the amount, if any, of Ryan's taxable gifts?

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?

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.

Chloe's gross estate consists of the following property valued at the date of death: Chloe's real estate is encumbered by a mortgage of $450,000, and Chloe's executor paid her funeral costs of $6,000 and charged fees for $24,000. Which of the following is a True statement?

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

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?

Andrea transferred $500,000 of stock to a trust, with income to be paid to her niece for 20 years (value $125,000) and the remainder to her nephew (value $375,000). Andrea named a bank as independent trustee but retained the power to determine how much income, if any, will be paid in any particular year. What is the amount of the taxable gift, if any? Explain your answer.

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

Property is included in the gross estate at the value a willing buyer would pay a willing seller, neither being under any compulsion to buy or to sell, and both having reasonable knowledge of the relevant facts.

At her death Tricia had an adjusted gross estate consisting of $8 million of property. Which of the following is a True statement about Tricia's estate or estate tax?

A serial gift strategy consists of arranging a trust to maximize the value of the applicable credit.