Question 1

Identify which of the following statements is true.

Accepted Answer

A) A taxable gift may occur when property is sold in an arm's length transaction for less than its FMV. 
B) An individual can inadvertently make a gift by underestimating a property's fair market value and selling it to a relative for a price below its fair market value. 
C) The statutory exemption from the gift tax for payments for medical care requires that the payment be made for a relative. 
D) All of the above are false. 
A) A taxable gift may occur when property is sold in an arm's length transaction for less than its FMV. 
B) An individual can inadvertently make a gift by underestimating a property's fair market value and selling it to a relative for a price below its fair market value. 
C) The statutory exemption from the gift tax for payments for medical care requires that the payment be made for a relative. 
D) All of the above are false.

Question 2

Molly sells her car,valued at $30,000,to her nephew Todd for $18,000.Molly has made a taxable gift.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is a completed gift?

Accepted Answer

A) Greta transfers $50,000 to a revocable trust benefiting her children Hans and Julio. 
B) Juan purchases a ski chalet using his own funds,but listing Penelope as a joint owner. 
C) Horatio transfers $60,000 to a bank account with Hazel.Hazel does not contribute any money to the account. 
D) Mike changes the beneficiary of his policy to Meredith. 
A) Greta transfers $50,000 to a revocable trust benefiting her children Hans and Julio. 
B) Juan purchases a ski chalet using his own funds,but listing Penelope as a joint owner. 
C) Horatio transfers $60,000 to a bank account with Hazel.Hazel does not contribute any money to the account. 
D) Mike changes the beneficiary of his policy to Meredith.

Question 4

Identify which of the following statements is false.

Accepted Answer

A) A gift occurs when a revocable trust is funded. 
B) A gift does not occur until the transfer is complete. 
C) A transfer is incomplete (and not subject to the gift tax)if the donor retains the power to name new beneficiaries or to change the interests of the beneficiaries. 
D) Transfers to an irrevocable trust can be deemed incomplete. 
A) A gift occurs when a revocable trust is funded. 
B) A gift does not occur until the transfer is complete. 
C) A transfer is incomplete (and not subject to the gift tax)if the donor retains the power to name new beneficiaries or to change the interests of the beneficiaries. 
D) Transfers to an irrevocable trust can be deemed incomplete.

Question 5

What is a "net gift" and what is the potential income tax problem associated with making a net gift?

Accepted Answer

A potential donor who wants to freeze a

Question 6

Vincent makes the following property transfers in the current year: • $5,000 tuition for a grandson paid directly to the school
• $1,000 medical expense for a child paid directly to a hospital
• $500 donation to the Democratic party
• $10,000 property settlement in conjunction with a divorce
• $3,000 room and board at college for a grandson paid directly to the school
Vincent's gifts for the year before considering the annual gift tax exclusion total

Accepted Answer

A) $19,500. 
B) $19,000. 
C) $3,000. 
D) $0. 
A) $19,500. 
B) $19,000. 
C) $3,000. 
D) $0.

Question 7

Karen purchased a beach house for $300,000 and immediately titled it in the names of Karen and Kenny,as joint tenants with right of survivorship.Karen and Kenny are not married.Did a gift occur? If so,for what amount?

Accepted Answer

Yes,a gift of one-ha

Question 8

Tia funds an irrevocable trust with $100,000,naming Vonda to receive income for life.Tia also grants Vonda a general power of appointment during her life.During the next year,Vonda directs the trustee to give $100,000 to Rick.Which of the following statements is not correct?

Accepted Answer

A) Tia made a $100,000 gift to Rick. 
B) Vonda makes a $100,000 gift to Rick. 
C) Tia has made a gift of $100,000 to Vonda. 
D) Exercising a general power of appointment constitutes a gift. 
A) Tia made a $100,000 gift to Rick. 
B) Vonda makes a $100,000 gift to Rick. 
C) Tia has made a gift of $100,000 to Vonda. 
D) Exercising a general power of appointment constitutes a gift.

Question 9

What is the due date for the gift tax return? Are there any exceptions? If so,what are they?

Accepted Answer

Gifts always are reportable on a calenda

Question 10

In 1998,Delores made taxable gifts to her son of property with an FMV of $200,000.In the current year when Delores dies,the property is worth $800,000.The amount included in Delores's estate tax base because of the 1998 gift is

Accepted Answer

A) $0. 
B) $189,000. 
C) $200,000. 
D) $800,000. 
A) $0. 
B) $189,000. 
C) $200,000. 
D) $800,000.

Question 11

Phil transfers $50,000 to a revocable trust benefiting his son,Josh.The transfer is a taxable gift.

Accepted Answer

A) True 
 B)False

Question 12

The gift tax is a wealth transfer tax that applies to transfers during a person's lifetime and transfers at death.

Accepted Answer

A) True 
 B)False

Question 13

Jack transfers property worth $250,000 to a revocable trust on January 1.Two-and-a-half years later,when the property is worth $300,000,the trust becomes irrevocable.Which of the following statements is correct?

Accepted Answer

A) A $300,000 gift occurs when the trust became irrevocable. 
B) A $250,000 gift occurs when the original transfer was made. 
C) A $250,000 gift occurs when the trust became irrevocable. 
D) Jack may elect which amount to report as a gift. 
A) A $300,000 gift occurs when the trust became irrevocable. 
B) A $250,000 gift occurs when the original transfer was made. 
C) A $250,000 gift occurs when the trust became irrevocable. 
D) Jack may elect which amount to report as a gift.

Question 14

In November 1976,Grant uses $30,000 of the specific exemption available at that time.The unified credit available to Grant for post-1976 transfers is reduced by

Accepted Answer

A) $0. 
B) $6,000. 
C) $15,000. 
D) $30,000. 
A) $0. 
B) $6,000. 
C) $15,000. 
D) $30,000.

Question 15

Elaine loaned her brother,Mike,$175,000 to purchase a new home.Elaine does not charge Mike any interest on the loan.What are the tax consequences to Elaine and Mike?

Accepted Answer

A) Elaine is treated as having made a gift of the forgone interest on the $175,000 loan to Mike. 
B) Elaine only has to impute interest on $75,000 of the loan to Mike. 
C) If Mike has no net investment income,Elaine does not have to treat the forgone interest as a gift. 
D) Mike can deduct the interest that he is deemed to have paid Elaine. 
A) Elaine is treated as having made a gift of the forgone interest on the $175,000 loan to Mike. 
B) Elaine only has to impute interest on $75,000 of the loan to Mike. 
C) If Mike has no net investment income,Elaine does not have to treat the forgone interest as a gift. 
D) Mike can deduct the interest that he is deemed to have paid Elaine.

Question 16

Steve gave stock with an adjusted basis of $7,000 and an FMV of $10,000 to Alice.No gift tax was paid.Later,Alice sold the stock for $12,000.The gain Alice will recognize on the sale is

Accepted Answer

A) $5,000. 
B) $2,000. 
C) $0. 
D) none of the above 
A) $5,000. 
B) $2,000. 
C) $0. 
D) none of the above

Question 17

George transfers property to an irrevocable trust for the benefit of his adult children and names himself as trustee.The trust document requires the trustee to distribute trust property to the beneficiaries at the trustee's discretion with the possibility of no distribution to certain beneficiaries as the trustee deems appropriate.The trust will terminate at the end of nine years,and the property will pass to George's children.Which of the following statements is correct?

Accepted Answer

A) The beneficiaries receive a present interest in the trust property when George transfers the assets to the trust. 
B) The transfer by George is eligible for the annual gift tax exclusion. 
C) George's transfer of property to the trust is not taxed under gift tax rules at the date of transfer. 
D) George's transfer of property to the trust is a gift of a future interest. 
A) The beneficiaries receive a present interest in the trust property when George transfers the assets to the trust. 
B) The transfer by George is eligible for the annual gift tax exclusion. 
C) George's transfer of property to the trust is not taxed under gift tax rules at the date of transfer. 
D) George's transfer of property to the trust is a gift of a future interest.

Question 18

Abby transfers $10,000 to a political organization to promote her favorite candidate for president.Does Abby's transfer qualify as a gift?

Accepted Answer

No,political contrib

Question 19

Contrast the Crummey trust with the Sec.2503(c)trust.

Accepted Answer

Contributions to both discretionary trus

Question 20

Identify which of the following statements is true.

Accepted Answer

A) The creation of a joint bank account constitutes a taxable gift. 
B) The creation of a joint tenancy by one person will result in a gift equal to the other joint tenant's pro rata interest in the property. 
C) The naming of a life insurance policy beneficiary constitutes a gift for transfer tax purposes. 
D) Since municipal bond interest is exempt from federal income taxation,gifting the bonds escapes the gift tax. 
A) The creation of a joint bank account constitutes a taxable gift. 
B) The creation of a joint tenancy by one person will result in a gift equal to the other joint tenant's pro rata interest in the property. 
C) The naming of a life insurance policy beneficiary constitutes a gift for transfer tax purposes. 
D) Since municipal bond interest is exempt from federal income taxation,gifting the bonds escapes the gift tax.

Exam 12: The Gift Tax

Identify which of the following statements is true.

Molly sells her car,valued at $30,000,to her nephew Todd for $18,000.Molly has made a taxable gift.

Which of the following is a completed gift?

Identify which of the following statements is false.

What is a "net gift" and what is the potential income tax problem associated with making a net gift?

Karen purchased a beach house for $300,000 and immediately titled it in the names of Karen and Kenny,as joint tenants with right of survivorship.Karen and Kenny are not married.Did a gift occur? If so,for what amount?

Tia funds an irrevocable trust with $100,000,naming Vonda to receive income for life.Tia also grants Vonda a general power of appointment during her life.During the next year,Vonda directs the trustee to give $100,000 to Rick.Which of the following statements is not correct?

What is the due date for the gift tax return? Are there any exceptions? If so,what are they?

In 1998,Delores made taxable gifts to her son of property with an FMV of $200,000.In the current year when Delores dies,the property is worth $800,000.The amount included in Delores's estate tax base because of the 1998 gift is

Phil transfers $50,000 to a revocable trust benefiting his son,Josh.The transfer is a taxable gift.

The gift tax is a wealth transfer tax that applies to transfers during a person's lifetime and transfers at death.

Jack transfers property worth $250,000 to a revocable trust on January 1.Two-and-a-half years later,when the property is worth $300,000,the trust becomes irrevocable.Which of the following statements is correct?

In November 1976,Grant uses $30,000 of the specific exemption available at that time.The unified credit available to Grant for post-1976 transfers is reduced by

Elaine loaned her brother,Mike,$175,000 to purchase a new home.Elaine does not charge Mike any interest on the loan.What are the tax consequences to Elaine and Mike?

Steve gave stock with an adjusted basis of $7,000 and an FMV of $10,000 to Alice.No gift tax was paid.Later,Alice sold the stock for $12,000.The gain Alice will recognize on the sale is

Abby transfers $10,000 to a political organization to promote her favorite candidate for president.Does Abby's transfer qualify as a gift?

Contrast the Crummey trust with the Sec.2503(c)trust.

Identify which of the following statements is true.

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