Question 1

Identify which of the following statements is false.

Accepted Answer

A) Gift tax returns are due annually by April 15 following the year of the gift.No extensions are allowed. 
B) The donor pays the gift tax generally. 
C) Gift tax returns are filed on a calendar-year basis. 
D) Receipt of an extension of time for filing a gift tax return does not extend the due date for payment of the gift tax. 
A) Gift tax returns are due annually by April 15 following the year of the gift.No extensions are allowed. 
B) The donor pays the gift tax generally. 
C) Gift tax returns are filed on a calendar-year basis. 
D) Receipt of an extension of time for filing a gift tax return does not extend the due date for payment of the gift tax.

Question 2

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.What are the gift tax consequences,if any?

Accepted Answer

George is considered to have made a gift

Question 3

Kenny is thinking of making a substantial gift of stock to his fiancée,Maria.The wedding is scheduled for October 1 of the current year.Kenny already has exhausted his unified credit.He also is considering giving $26,000 cash this year to each of his three children by a previous marriage.What tax issues should Kenny consider with respect to the gifts he plans to make to Maria and his three children?

Accepted Answer

• Will the gift to Maria be eligible for

Question 4

Greg transfers property on August 8 of the current year with an adjusted basis of $40,000 and an FMV of $90,000 to his ex-wife as a property settlement that is part of their divorce agreement.The property settlement agreement and the divorce were both finalized on June 3 of the current year.Greg has made a gift of

Accepted Answer

A) $0. 
B) $40,000. 
C) $80,000. 
D) $90,000. 
A) $0. 
B) $40,000. 
C) $80,000. 
D) $90,000.

Question 5

The changing of a life insurance policy beneficiary from a spouse to an adult daughter constitutes a gift for transfer tax purposes.

Accepted Answer

A) True 
 B)False

Question 6

Why are Crummey trusts popular for minors?

Accepted Answer

A) They are considered gifts of a future interest and allow the donor to take an exclusion. 
B) They are considered gifts of a present interest,permitting an annual gift tax exclusion. 
C) Crummey trusts require annual distributions to minors. 
D) Donors are only subject to the gift tax when funds are distributed from Crummey trusts. 
A) They are considered gifts of a future interest and allow the donor to take an exclusion. 
B) They are considered gifts of a present interest,permitting an annual gift tax exclusion. 
C) Crummey trusts require annual distributions to minors. 
D) Donors are only subject to the gift tax when funds are distributed from Crummey trusts.

Question 7

A gift-splitting election

Accepted Answer

A) requires each spouse to give property. 
B) may reduce the amount of the taxable gifts of the donor-decedent. 
C) results in a $6,500 per donee annual exclusion for each spouse. 
D) is binding on future years. 
A) requires each spouse to give property. 
B) may reduce the amount of the taxable gifts of the donor-decedent. 
C) results in a $6,500 per donee annual exclusion for each spouse. 
D) is binding on future years.

Question 8

Identify which of the following statements is true.

Accepted Answer

A) If the annual exclusion for gifts is not used in the current year,the unused portion can be carried forward to subsequent years. 
B) Individuals may not give more than $14,000 per person in gifts each year before being taxed on the transfer. 
C) For transfer tax purposes,both the charitable contribution deduction and the marital deduction are unlimited. 
D) All of the above are false. 
A) If the annual exclusion for gifts is not used in the current year,the unused portion can be carried forward to subsequent years. 
B) Individuals may not give more than $14,000 per person in gifts each year before being taxed on the transfer. 
C) For transfer tax purposes,both the charitable contribution deduction and the marital deduction are unlimited. 
D) All of the above are false.

Question 9

Describe the penalties for undervaluing gifts on a gift tax return.

Accepted Answer

Sec.6662 imposes a penalty,at one of two

Question 10

Which of the following statements is true?

Accepted Answer

A) Transfers to an irrevocable trust can be deemed incomplete due to powers retained by the grantor. 
B) If the donor retains the power to change the trust beneficiary,the gift is complete. 
C) Transfers to a revocable trust are completed gifts. 
D) All of the above are false. 
A) Transfers to an irrevocable trust can be deemed incomplete due to powers retained by the grantor. 
B) If the donor retains the power to change the trust beneficiary,the gift is complete. 
C) Transfers to a revocable trust are completed gifts. 
D) All of the above are false.

Question 11

A Sec."2503(c)trust"

Accepted Answer

A) is a discretionary trust for a beneficiary of any age. 
B) is intended for beneficiaries over the age of 20. 
C) requires distribution of trust assets to the beneficiary at age 21. 
D) can be formed only by the parent(s)of the beneficiaries. 
A) is a discretionary trust for a beneficiary of any age. 
B) is intended for beneficiaries over the age of 20. 
C) requires distribution of trust assets to the beneficiary at age 21. 
D) can be formed only by the parent(s)of the beneficiaries.

Question 12

Calvin transfers land to a trust.His daughter Melissa will receive the income from the land for ten years.After ten years,the land is returned to Calvin.Calvin's interest is

Accepted Answer

A) a term certain. 
B) a life estate. 
C) a reversionary interest. 
D) none of the above 
A) a term certain. 
B) a life estate. 
C) a reversionary interest. 
D) none of the above

Question 13

Identify which of the following statements is false.

Accepted Answer

A) The marital deduction for gift tax purposes is limited to one-half the value of the property transferred. 
B) The marital deduction is generally allowed since the transfer remains within the economic (husband/wife)unit. 
C) The marital deduction for gift tax purposes is limited to the amount of the includible gift (e.g. ,the amount of the gift that is in excess of the annual exclusion). 
D) Transfers of community property are eligible for the marital exclusion. 
A) The marital deduction for gift tax purposes is limited to one-half the value of the property transferred. 
B) The marital deduction is generally allowed since the transfer remains within the economic (husband/wife)unit. 
C) The marital deduction for gift tax purposes is limited to the amount of the includible gift (e.g. ,the amount of the gift that is in excess of the annual exclusion). 
D) Transfers of community property are eligible for the marital exclusion.

Question 14

In the current year,Cesar,who is single,gives $26,000 to each of his 20 nieces and nephews for a total property transfer of $520,000.Cesar's taxable gifts total

Accepted Answer

A) $520,000. 
B) $260,000. 
C) $300,000. 
D) $240,000. 
A) $520,000. 
B) $260,000. 
C) $300,000. 
D) $240,000.

Question 15

In the current year,Donna gives $50,000 cash and $30,000 of stock to Mike.She also gives $40,000 of tax-exempt bonds to Angela.Her husband,Andy,gives $200,000 of land to Angela.Assume the couple elects gift splitting for the current year.Donna's taxable gifts total

Accepted Answer

A) $132,000. 
B) $148,000. 
C) $110,000. 
D) $60,000. 
A) $132,000. 
B) $148,000. 
C) $110,000. 
D) $60,000.

Question 16

Discuss the ways in which the estate and gift tax system is a unified system.

Accepted Answer

The same tax rates apply for both gift a

Question 17

Hu makes a gift of his home to a local homeless shelter (a 501(c)(3)charity).Hu will retain his home for 10 years,after which the homeless shelter will take possession.The value of Hu's 10-year interest is $30,000 and the remainder interest is valued at $120,000.Which of the following statements is correct?

Accepted Answer

A) Hu is allowed a charitable deduction on his gift tax return for $150,000 in the current year. 
B) Hu is allowed an exclusion of $12,000 on his gift of $120,000 to the charity. 
C) Hu is not allowed to deduct the contribution until the charity takes possession in 10 years. 
D) Hu has a charitable contribution deduction of $120,000 on his current gift tax return. 
A) Hu is allowed a charitable deduction on his gift tax return for $150,000 in the current year. 
B) Hu is allowed an exclusion of $12,000 on his gift of $120,000 to the charity. 
C) Hu is not allowed to deduct the contribution until the charity takes possession in 10 years. 
D) Hu has a charitable contribution deduction of $120,000 on his current gift tax return.

Question 18

A husband transfers $90,000 by gift directly to his wife.The marital deduction for the transfer is

Accepted Answer

A) $0 unless he elects to claim one. 
B) $90,000. 
C) $76,000. 
D) none of the above 
A) $0 unless he elects to claim one. 
B) $90,000. 
C) $76,000. 
D) none of the above

Question 19

Jennifer and Terry,a married couple,live in Illinois; which is a common law state.In the current year,Terry gives his sister $200,000 cash.Jennifer and Terry agree to gift splitting.Neither Jennifer nor Terry has made any taxable gifts in prior years.What are Jennifer and Terry's taxable gifts?

Accepted Answer

Since they elect gift splitting,each spo

Question 20

Virginia gave stock with an adjusted basis of $8,000 and an FMV of $10,000 to Carmen.No gift tax was paid on the transfer.Carmen then sold the stock for $9,000.The gain or loss Carmen will recognize on the sale is

Accepted Answer

A) $2,000 gain. 
B) $1,000 gain. 
C) $1,000 loss. 
D) none of the above 
A) $2,000 gain. 
B) $1,000 gain. 
C) $1,000 loss. 
D) none of the above

Exam 12: The Gift Tax

Identify which of the following statements is false.

The changing of a life insurance policy beneficiary from a spouse to an adult daughter constitutes a gift for transfer tax purposes.

Why are Crummey trusts popular for minors?

A gift-splitting election

Identify which of the following statements is true.

Describe the penalties for undervaluing gifts on a gift tax return.

Which of the following statements is true?

A Sec."2503(c)trust"

Calvin transfers land to a trust.His daughter Melissa will receive the income from the land for ten years.After ten years,the land is returned to Calvin.Calvin's interest is

Identify which of the following statements is false.

In the current year,Cesar,who is single,gives $26,000 to each of his 20 nieces and nephews for a total property transfer of $520,000.Cesar's taxable gifts total

In the current year,Donna gives $50,000 cash and $30,000 of stock to Mike.She also gives $40,000 of tax-exempt bonds to Angela.Her husband,Andy,gives $200,000 of land to Angela.Assume the couple elects gift splitting for the current year.Donna's taxable gifts total

Discuss the ways in which the estate and gift tax system is a unified system.

A husband transfers $90,000 by gift directly to his wife.The marital deduction for the transfer is

Jennifer and Terry,a married couple,live in Illinois; which is a common law state.In the current year,Terry gives his sister $200,000 cash.Jennifer and Terry agree to gift splitting.Neither Jennifer nor Terry has made any taxable gifts in prior years.What are Jennifer and Terry's taxable gifts?

Virginia gave stock with an adjusted basis of $8,000 and an FMV of $10,000 to Carmen.No gift tax was paid on the transfer.Carmen then sold the stock for $9,000.The gain or loss Carmen will recognize on the sale is

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