Exam 12: The Gift Tax

In the current year, Martha makes the transfers below to her husband, Ryan. What is the amount, if any, of her marital deduction? a)In August, she gives him a house valued at $250,000. b)In December, she gives him a 15-year income interest in a trust with the bank name as trustee. She names her son as the remainderman. The trust is irrevocable and is funded with $500,000 of assets, and 8% is the applicable interest rate.

Describe the penalties for undervaluing gifts on a gift tax return.

The changing of a life insurance policy beneficiary from a spouse to an adult daughter constitutes a gift for transfer tax purposes.

Which of the following statements is true?

The annual exclusion permits donors to make gifts of $15,000 each to multiple donees.

Discuss the negative aspects of gifts.

Mia makes a taxable gift when she makes her mother a joint owner on Mia's bank account. Mia has $25,000 in the account.

Tracy gave stock with an adjusted basis of $18,000 and an FMV of $15,000 to her nephew Phil. No gift tax was paid. Phil sold the stock for $16,000. The gain or loss Phil will recognize on the sale is

Identify which of the following statements is false.

On June 1, Sherri deposits $60,000 into a new joint bank account in the names of Sherri and John. Her friend John makes no deposits. On December 15th, John withdraws $25,000 from the joint account. What are the gift tax consequences, if any?

Identify which of the following statements is true.

Identify which of the following statements is false.

A Sec. "2503(c)trust"

On January 1, Jeff loans his friend Patrick $7,000 to buy a used car. Patrick signs a noninterest-bearing demand note. The applicable interest rate is 5%. Which of the following statements is correct?

On September 1, George transfers his entire ownership rights in a $250,000 life insurance policy on his own life to his sister, Sally. The policy's interpolated terminal reserve is $30,000 as of September 1. On July 1, George had paid the policy's $6,000 annual premium. On July 1 of the subsequent year, George again paid the premium on the policy. What are the gift tax consequences in the subsequent year, if any?

Gordon died on January 1 and by his will left land with an adjusted basis of $60,000 and an FMV of $100,000 to Becky. Becky disclaims the property on December 31 of the year of death, when the land was still worth $100,000. Becky has made a gift (before the annual gift tax exclusion)of

A gift-splitting election

Ed gives Steve land with an adjusted basis of $40,000 and an FMV of $90,000. Ed paid no gift tax. Ed then inherits the same land back from Steve at Steve's death eight months later. At Steve's death, the land is worth $120,000. Ed's basis in the land becomes

On July 1, Frank loans his brother Matt $200,000. The loan is evidenced by an interest-free demand note. The loan is still outstanding on December 31. The applicable interest rate is 12%. Frank is treated as having made a gift of

Jason funds an irrevocable trust with Liberty Bank as trustee and reserves the right to receive the income for seven years. He provides that at the end of the seventh year, the trust assets will pass outright to his adult daughter, Paula, or to Paula's estate should Paula not be alive. Jason transfers assets valued at $1.5 million to the trust; the assets at present are producing income of about 7.5% per year. Assume that the Sec. 7520 rate per the actuarial tables for the month of the transfer is 10%. What tax issues should Jason consider regarding the trust?