Exam 12: The Gift Tax

Bryce pays $10,000 for his adult grandson's tuition at medical school and $8,000 for the grandson's room and board in the medical school's dormitory.All payments are made directly to the medical school.Do these payments by Bryce qualify as gifts?

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

Tracy gave stock with an adjusted basis of $18,000 and an FMV of $15,000 to her nephew Phil.No gift tax was paid.Phil sold the stock for $16,000.The gain or loss Phil will recognize on the sale is

Sandra,who is married,creates an irrevocable trust in the amount of $200,000 for her 18-year-old daughter,Kelly.She names the bank as trustee.Before Kelly reaches age 21,the trustee may pay the income to Kelly.Kelly will receive any undistributed assets when she reaches age 21.If Kelly dies before age 21,the assets will be paid to her estate.In addition,Sandra creates an irrevocable trust for her son,Kevin,age 21.He is entitled to withdraw up to $28,000 per year.Sandra contributes $28,000 in the current year.Sandra elects gift splitting with her husband.Her husband makes no gifts in the current year.Sandra's annual exclusions to be claimed on her gift tax return total

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

Jason funds an irrevocable trust with Liberty Bank as trustee and reserves the right to receive the income for seven years.He provides that at the end of the seventh year,the trust assets will pass outright to his adult daughter,Paula,or to Paula's estate should Paula not be alive.Jason transfers assets valued at $1.5 million to the trust; the assets at present are producing income of about 7.5% per year.Assume that the Sec.7520 rate per the actuarial tables for the month of the transfer is 10%.What tax issues should Jason consider regarding the trust?

Identify which of the following statements is true.

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?

Which of the following is a completed gift?

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

Identify which of the following statements is false.

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?

Identify which of the following statements is true.

Identify which of the following statements is false.

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?

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

Discuss at least two reasons for making inter vivos (lifetime)gifts.

Discuss the statutory exemptions from the gift tax.

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?

Identify which of the following statements is false.