Exam 27: Family Tax Planning

Homer and Laura are husband and wife.At the time of Homer's prior death in 2015,they owned the following: land as tenants by the entirety worth $2,000,000 (purchased by Homer) and stock as equal tenants in common worth $3,000,000 (purchased by Laura).Homer owns an insurance policy on his life (maturity value of $1,000,000) with Laura as the designated beneficiary.Homer's will passes all his property to Laura.How much marital deduction is allowed Homer's estate?

Eric dies at age 96 and is survived by his third wife,Monique (age 22),and a granddaughter,Paula (age 50).Eric's will divides his $11 million estate between these two survivors.Both of these transfers are subject to the generation skipping transfer tax (GSTT).

Classify each statement appearing below. a.No taxable transfer occurs b.Gift tax applies c.Estate tax applies -Harry pays for the tuition for his niece to attend Drake University.The niece does not qualify as Harry's dependent.

Murray owns an insurance policy on the life of his father,Logan.Upon Logan's death,the policy proceeds of $2,000,000 are paid to the designated beneficiary,Grace.What are the transfer tax consequences resulting from Logan's death,based on the following independent assumptions? a.Grace is Murray's daughter. b.Grace is Murray's wife. c.What are the tax consequences if Murray dies first (i.e. ,predeceases both Grace and Logan)?

Classify each statement appearing below. a.No taxable transfer occurs b.Gift tax applies c.Estate tax applies -Under a prenuptial agreement,Herbert transfers stock to Norma.One month later,Herbert and Norma are married.

Classify each statement appearing below. a.No taxable transfer occurs b.Gift tax applies c.Estate tax applies -Homer purchases a U.S.savings bond listing title as: "Homer,payable to Bernice upon Homer's death." Bernice is Homer's sister.

For both the Federal gift and estate tax,a deduction is allowed for certain transfers to a spouse.

In 1992,Daniel and Mia acquire realty for $2 million,with Daniel furnishing $1.5 million of the purchase price and Mia providing the balance.Title to the property is listed as: "Daniel and Mia,joint tenants with right of survivorship." In 2015,Mia dies first when the realty is worth $4 million.How much is included in her gross estate under the following circumstances? a.Daniel and Mia are brother and sister. b.Daniel and Mia are husband and wife.

A Federal gift tax return does not have to be filed if no gift tax is payable.

Which,if any,of the following statements correctly reflects the rules applicable to the alternate valuation date ?

At the time of his death,Hal owned 10 cemetery lots worth $40,000 ($4,000 each) for use by himself and his family.These lots are not included in Hal's gross estate and no deduction is allowed the estate.

At the time of her death,Emma still owed $36,000 on her church pledge for the year.Because church pledges are not an enforceable obligation in the state where Emma resided,her estate cannot claim a deduction for the $36,000 it later pays.

In determining the Federal gift tax on a current gift:

Match each statement with the correct choice. Some choices may be used more than once or not at all. a.In the current year, Debby, a widow, dies. Two years ago she inherited a large amount of wealth from her brother.b.Death does not defeat an owner's interest in property.c.Exists only if husband and wife are involved.d.A type of state tax on transfers by death.e.Must decrease the amount of the gross estate.f.Annual exclusion not allowed.g.Cumulative in effect.h.Right of survivorship present as to type of ownership.i.Avoids the terminable interest rule of the marital deduction.j.Exemption equivalent.k.Bypass amount.l.No correct match provided. -QTIP election

At one point,the tax rates applicable to transfers by gift were lower than those applying to transfers by death.

In his will,Hernando provides for $50,000 to go to the Madrid,Spain,school system.Because it is a foreign charity,the bequest will not qualify as a charitable deduction for estate tax purposes.

In which of the following situations has a taxable gift occurred?

Classify each statement appearing below. a.No taxable transfer occurs b.Gift tax applies c.Estate tax applies -Howard establishes a trust,life estate to his children,remainder to the grandchildren.Under its terms,the trust is revocable by Howard.Howard later relinquishes the right to revoke the trust.

Mitch pays the surgeon and the hospital for his nondependent aunt's heart bypass operation.The transfer is not subject to the gift tax.

Match each statement with the correct choice. Some choices may be used more than once or not at all. a.In the current year, Debby, a widow, dies. Two years ago she inherited a large amount of wealth from her brother.b.Death does not defeat an owner's interest in property.c.Exists only if husband and wife are involved.d.A type of state tax on transfers by death.e.Must decrease the amount of the gross estate.f.Annual exclusion not allowed.g.Cumulative in effect.h.Right of survivorship present as to type of ownership.i.Avoids the terminable interest rule of the marital deduction.j.Exemption equivalent.k.Bypass amount.l.No correct match provided. -Exclusion amount