Exam 13: The Estate Tax

The gross-up rule requires

Identify which of the following statements is true.

Lou dies on April 12,2011.All of Lou's property passed to Paula,his daughter.Paula dies on January 15,2013.Both Lou's and Paula's estates pay federal estate taxes.Lou's estate tax was $350,000.How much can Paula's estate claim for a credit for tax on prior transfers?

The estate tax is a wealth transfer tax.

Sasha gives $1,000,000 to her granddaughter.Sasha has used all of her unified credit and is in the 40% marginal gift tax bracket; ignore the annual exclusion and exemption.What is the amount of her tax on this transfer?

Ernie died this year.His will creates a $2,000,000 QTIP trust for his widow.Ernie's executor elects to claim the marital deduction for the QTIP transfer.At the time of the surviving spouse's death,the value of the QTIP trust is $3.6 million.The amount of the QTIP trust included in the surviving spouse's gross estate is

Which of the following circumstances would cause the gifted property to be included in the donor's gross estate? I.Donor retains a life estate in the gift property. II)Donor retains the power to revoke or amend the gift. III)Donor gives more than $14,000 to one donee in one year. IV)Donor dies within three years of gifting land.

Lily dies early in the current year.All her property passes subject to her will,which provides that her surviving husband,Rick,is to receive all the property outright.Her will further states that any property Rick disclaims will pass instead to their children in equal shares.Lily's gross estate is about $5 million,and her Sec.2053 deductions are very small.Rick,who is in poor health,already owns about $3 million of property.What tax issues should Rick consider with respect to the property bequeathed to him by his wife?

Martin transfers stock to an irrevocable trust and names himself to receive the trust income for life with the remainder interest gifted to his son.When Martin dies,

In 2000,Mike transfers $100,000 of leased land to a trust.The trust income is payable to Mike's son for 13 years,after which time the land is to revert to Mike.This year,Mike dies when the land is valued at $210,000.The applicable federal rate is 10%,and the reversionary actuarial factor is 0.30.How much of the trust value must be included in Mike's estate?

In 2001,Polly and Fred,brother and sister,purchased a condominium at a golf resort.Polly contributed 60% of the $200,000 cost; Fred contributed 40%.Polly dies in the current year when the condominium has a $300,000 value.How much is included in Polly's estate?

Outline and briefly describe the estate tax computation,beginning with the gross estate.

Identify which of the following statements is true.

Identify which of the following statements is false.

In 2002,Gert made a $5,000,000 taxable gift.The 2002 gift tax on $5,000,000 was $2,275.800.Gert was entitled to a unified credit of $345,800,resulting in a gift tax of $1,193,000.The marginal tax rate in 2002 is 50%.Assume Gert dies in 2013 when the credit is $2,045.800 and the marginal rate is 40%,the tax on $5,000,000 would equal $1,945,800 before subtracting any credit.In arriving at Gert's estate tax liability,what is the amount subtracted for 1992 gift taxes paid?

Denise died April 1 and owned several bonds that paid interest March 31 and September 30.Also,she owned stock that paid dividends quarterly on March 31,June 30,September 30,and December 31.Denise's estate received the interest and dividends on the payment dates.What should be included in Denise's gross estate?

In 2001,Alejandro buys an annuity for $100,000 that will pay Alejandro an annual amount for life with survivor benefits to his wife.When Alejandro dies in the current year,a comparable contract would have cost $81,000.What amount is included in Alejandro's gross estate?

In February of the current year,Tom dies.Two years and nine months before the date of death,Tom made a gift of stock valued at $2 million.Gift taxes paid on the transfer by Tom were $435,000 after reduction for a $345,800 unified credit ($780,800 - $345,800).At the time of his death,the gifted stock was valued at $2.3 million.The amount included in Tom's gross estate from this transfer is

Donna died on June 1 of the current year.The executor considers the following information when preparing her estate tax return: • In 1997,Donna transfers title to her personal residence to her son.The residence is worth $60,000 on the transfer date.Donna continued to live alone in the residence until her death.She did not pay any rent.At her death,the residence is worth $100,000. • In 1998,Donna created an irrevocable trust and funded it with $300,000 of assets.Donna names a bank as trustee.According to the trust agreement,all the trust income is to be paid out annually for 25 years.The trustee,however,is to decide how much income to pay each year to Donna's son and daughter.Upon termination of the trust,the assets are to be distributed equally among her two children or their estates.The trust's assets are worth $320,000 when Donna dies. • In 1998,Donna created a revocable trust with a bank named as trustee.She named her grandchild Joe as the beneficiary for life.Upon Joe's death,the property is to be distributed equally among Joe's descendants.The trust assets are worth $300,000 when Donna dies.How much would be included in Donna's gross estate?

The probate estate includes property that passes by will or an intestacy statute and does not include property that passes due to a beneficiary designation.