Exam 27: Family Tax Planning

At the time of his death,Gene held a Roth IRA account with his wife as the designated beneficiary.The IRA is included in Gene's gross estate.

At the time of her death,Rita held a promissory note from a loan she had made to her son.If Rita's will forgives the loan,the note is not included in her gross estate.

Barry pays State University for his dependent daughter's room and board.Barry has made a transfer that is subject to the Federal gift tax.

In 1985,Drew creates a trust with $1,000,000 of securities.Under the terms of the trust,Paula (Drew's wife) is granted a life estate with remainder to their children.Drew makes a QTIP election as to the trust.Drew dies in 1992 when the trust is worth $1,500,000,and Paula dies in 2015 when the trust is worth $2,000,000.Which,if any,of the following is a correct statement?

Prior to his death in 2015,Ethan made the following taxable gifts. Year of Gift Amount of Gift Stock in Crimson Corporation Term life insurance policy (maturity value of $200,000) Unimproved land 2000 2013 2013 $800,000 -0- 800,000 The policy on Ethan's life was given to the designated beneficiary.The gift of the stock and the land generated gift taxes of $28,750 and $65,250,respectively. As to these transfers,how much is included in Ethan's gross estate?

Concerning the formula for the Federal estate tax,which,if any,of the following statements is correct?

The use of the election to split gifts under § 2513 is not necessary for spouses who make gifts of their community property.

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. -Credit for tax on prior transfers (under § 2013)

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. -Community property

Classify each statement appropriately. a.Deductible from the gross estate in arriving at the taxable estate.b.Not deductible from the gross estate in arriving at the taxable estate. -Selling expenses incurred to sell estate assets in order to pay administration expenses.

Sally's will passes real estate to Otto (her surviving spouse).The real estate is worth $800,000 but is subject to a mortgage of $200,000.The transfer provides Sally's estate with a marital deduction of $600,000.

Ray purchases U.S.savings bonds which he lists as "Ray and Donna" as co-owners.Donna is Ray's daughter.Donna predeceases Ray.No gift or estate tax consequences result from this situation.

At the time of her death,Sophia was a participant in her employer's qualified pension plan.Her accrued balance in the plan is: Employer's contribution $1,300,000 Sophia's contribution 800,000 Income earned by plan 900,000 Sophia also was covered by her employer's group term life insurance program.Her policy (maturity value of $100,000) is made payable to Aiden (Sophia's husband).Aiden is also the designated beneficiary of the pension plan. a.Regarding these assets,how much is included in Sophia's gross estate? b.In Sophia's taxable estate? c.How much gross income must Aiden recognize,when collecting on these items?

Although qualified tuition plans under § 529 are treated favorably for gift tax purposes,such plans are subject to estate tax consequences upon the grantor's death.

Iris dies intestate (i.e. ,without a will).All of her property passes to her heirs in accordance with the order of distribution prescribed under applicable state law.

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. -Election to split gifts (§ 2513)

Which,if any,of the following is a correct statement regarding the filing of a gift tax return (Form 709)?

Some states impose inheritance taxes,but the Federal tax system does not.

In 2000,Irv creates a revocable trust,income payable to his children for life,remainder to his grandchildren.In 2013,Irv relinquishes the power to revoke the trust.If Irv dies in 2015,the trust is not included in his gross estate.

Classify each statement appropriately. a.Deductible from the gross estate in arriving at the taxable estate.b.Not deductible from the gross estate in arriving at the taxable estate. -State income taxes accrued prior to death.