Exam 14: Transfer Taxes and Wealth Planning

Matthew and Addison are married and live in Michigan,a common-law state.For the holidays Addison gave cash gifts of $30,000 to each of her two sons,and Matthew gave $40,000 to his daughter.What is the amount of Addison's taxable gifts if Matthew and Addison opt to gift split?

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.

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?

No deductions are allowed when calculating the taxable estate.

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 Alex's friend,Kimberly,was disabled.Alex paid $25,000 to Kimberly's doctor for medical expenses.In addition,Alex also paid $15,000 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?

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

For 2017,the exemption equivalent for the estate tax is $5.49 million.

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 terminable interest in property is any interest that terminates during the current year.

Aiden transferred $2 million to an irrevocable trust with income to Valeria for her life and the remainder to Jocelyn (or her estate).Calculate the value of the remainder and the life estate if Valeria's age and the prevailing interest rate result in a Table S discount factor for the remainder of 0.47.

Last year Diego transferred a life insurance policy worth $75,000 to an irrevocable trust with directions to distribute the corpus of the trust to his grandson,Juan,upon his graduation from college,or to Juan's estate upon his death.Diego paid $5,000 of gift tax on the transfer of the policy.Early this year,Diego died and the insurance company paid $600,000 to the trust.What amount,if any,is included in Diego's gross estate?

For the holidays,Samuel gave a necklace worth $35,000 to Jennifer and jewelry worth $44,000 to Savannah.Samuel is married to Wendy and they live in a community property state.Has Samuel made any taxable gifts and,if so,in what amounts?

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.

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

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?

A serial gift strategy uses multiple gifts to maximize the value of the annual exclusion.

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 $1 million.Sophia was only able to provide $200,000 of the purchase price.If Sophia dies,what is the amount of her 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.

Christian transferred $60,000 to an irrevocable trust for the benefit of his three daughters.The three daughters share income equally for five years and then the corpus of the trust is to be divided equally between them.What is the amount of the taxable gifts,if any,made by Christian?