Exam 12: The Gift Tax

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?

The annual exclusion permits donors to make gifts of $14,000 each to multiple donees.

Ward and June decide to divorce after 30 years of marriage.Ward transfers $500,000 to June in settlement of her property rights.What are the gift tax consequences of this transfer?

A "Crummey demand power" in a trust document allows the donor to demand a distribution from the trust in years in which earnings exist within the trust.

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

Ida sells some stock to Mae for $20,000 at a time when the stock is valued at $50,000.Later in the year,she gives Mae $15,000 in cash. a)What is the amount of Ida's taxable gifts? b)How would your answer to Part (a)change if Ida gave the cash to Jonathan instead of to Mae?

Which of the following situations requires that a gift tax return be filed?

In 2013,Lilly makes taxable gifts aggregating $5.25 million.Her only other taxable gifts amount to $1 million,all of which were made in 1998.What is her gift tax liability?

Damitria transfers her rights in a $100,000 insurance policy on June 1 to Tremayne.The policy has a cash value of $9,000 and an interpolated terminal reserve of $8,500.The annual policy premium of $12,000 had been paid on January 1.Damitria's gift (before the annual gift tax exclusion)to Tremayne is

Identify which of the following statements is false.

A Crummey trust

In the current year,Bonnie,who is single,sells stock valued at $60,000 to Linda for $15,000.Later that year,Bonnie gives Linda $25,000 in cash.Bonnie's taxable gifts from these transfers total

Roger makes a $1,000,000 cash gift on January 1 of the current year,and dies on February 1 of the current year.Roger's gift tax return is due

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.

Identify which of the following statements is true.

Mike transfers securities to an irrevocable trust and gives Rachel the power to determine who will receive the trust's income and assets.Rachel,her estate,and her creditors cannot be beneficiaries or receive the trust assets.Rachel has a general power of appointment.

In 2014,Letty makes taxable gifts totaling $4 million.Her only other taxable gifts amount to $1 million,all of which were made in 2009.What is Letty's 2012 gift tax liability before the unified credit?

In October 1976,Marian made a large taxable gift.It was her first gift.Marian used her $30,000 specific exemption to reduce her taxable gift amount.What impact does this gift have on her unified credit and death tax base?

The purchase of a $15,000 engagement ring generates a taxable gift necessitating the filing of a gift tax return.