Exam 25: Transfer Taxes and Wealth Planning of the Cfa Institute

Isaac is married and wants to transfer the maximum amount of cash to each of his four children and six grandchildren. How much in total can Isaac transfer to his children and grandchildren each year without triggering any taxable gifts?

A transfer of cash to a bank account held in joint tenancy with the right of survivorship is not a completed gift.

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

The income tax benefit derived from a step-up in tax basis should be measured against the estate tax cost of including the property in the decedent's gross estate.

The debts of the decedent at the time of death are deducted in calculating the taxable estate.

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.

At his death Trevor had a probate estate consisting of $4 million of property. Which of the following is a true statement about Trevor's estate or estate tax?

The theft of property included in the gross estate is only deductible in calculating the taxable estate if the loss exceeds 10 percent of the decedent's adjusted gross estate.

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

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

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?

Proceeds of life insurance paid to the decedent's estate due to the death of the decedent are included in the decedent's gross estate even if the decedent had no ownership rights in the policy at the time of death.

Which of the following transfers is a completed gift?

Ava transferred $1.5 million of real estate into an irrevocable trust for her son, Luis. The trustee was directed to retain income until Luis' 21st birthday and then pay him the corpus of the trust. Ava retained the power to require the trustee to pay income to Luis at any time, and the right to the assets if Luis predeceased her. What amount of the trust, if any, will be included in Ava's estate if she died shortly after making the transfer?

Which of the following is a true statement?

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

Natalie transferred $500,000 of bonds to a revocable trust with directions to the trustee to pay income to her aunt for five years after which the corpus is to be distributed to Natalie's niece. At year end, the trustee paid $15,000 of income to the aunt. Which of the following is a true statement?

Proceeds of life insurance paid due to the death of the decedent are included in the decedent's gross estate if the decedent had the right to designate the beneficiary of the policy.

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.

Which of the following statements is(are) true?