Exam 17: The Federal Gift and Estate Taxes

Under his grandfather's will,Tad is entitled to receive shares of Ford Motor Company.For Federal tax purposes,Tad is not allowed to disclaim some of these shares and accept the others.

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.Scheduled to be eliminated by 2010. c.Exists only if owners are husband and wife. d.A type of state death tax. e.A certificate of deposit listed as "B. Brown, payable on proof of death to my daughter, Evelyn." 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.Exclusion amount k.Replaced by a deduction. l.No correct match provided. -General power of appointment

Classify each of the independent statements appearing below. a.Some or all of the interest included in the decedent's gross estate. b.None of the interest included in the decedent's gross estate -Surviving spouse's share of the community property.

Eric dies at age 96 and is survived by his third wife,Monique (age 22),and a granddaughter,Paige (age 50). Eric's will divides his $6 million estate between these two survivors.Both of these transfers are subject to the generation skipping transfer tax (GSTT).

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

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 -Mortgage on land included in gross estate and willed to decedent's children.

In 2006 and in order to avoid U.S.taxes,John a U.S.citizen,moves to Buenos Aires where he becomes a resident of Argentina.Any gifts John makes in 2008 are not subject to the U.S.gift tax.

Classify each statement appearing below. a.No taxable transfer occurs b.Gift tax applies c.Estate tax applies -Darlene holds a general power of appointment over the income from a trust created by her brother.Darlene dies during the year without having exercised the power.The income is distributed to children of the brother in accordance with the terms of the trust instrument.

In 2003,Otto dies leaving an after-tax estate of $2,000,000.Under the terms of Otto's will,this amount is placed in trust,life estate to Joyce (Otto's daughter),remainder to Sylvan (Otto's grandson).The executor of Otto's estate elects to use the $1,000,000 exemption (the maximum available in 2003)for generation skipping transfer tax (GSTT)purposes.Joyce dies in 2008 when the trust is worth $3,000,000.One result of these transactions is:

Community property law has been influential in the enactment of several provisions of the Federal estate and gift tax. In this regard,comment on the following. a.The election to split gifts under § 2513. b.The marital deduction under §§ 2056 and 2523.

At the time of his death,Dustin owned some common stock. The Gray Corporation stock is sold by the executor of the estate five months after Dustin's death for $1,300,000.If the alternate valuation date is properly elected,the value of Dustin's estate as to these stocks is:

Classify each statement appearing below. a.No taxable transfer occurs b.Gift tax applies c.Estate tax applies -Using his own funds,Horace establishes a savings account designating ownership as follows: "Horace and Nadine as joint tenants with right of survivorship." Horace predeceases Nadine.

Reba purchases U.S.savings bonds which she lists in the name of Rod,Reba's son.The purchase of the bonds constitutes a gift.

At the time of her death in 2008,Pam still owed $24,000 on her church pledge for the year.Even though a church pledges are not an enforceable obligation in the state where Pam resided,her estate can claim a deduction for the $40,000 it later pays.

At the time of her death in an automobile accident,Laura left a large probate estate,most of which she had inherited from her mother several years ago.Comment on Laura's Federal estate tax position in connection with each of the following points. a.Probate estate versus gross estate. b.Credit for the tax on prior transfers.

Prior to his death in 2008,Rex made the following gifts. As a result of the 2007 transfer,Rex paid a gift tax of $70,000. As to these transactions,Rex's gross estate includes:

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.Scheduled to be eliminated by 2010. c.Exists only if owners are husband and wife. d.A type of state death tax. e.A certificate of deposit listed as "B. Brown, payable on proof of death to my daughter, Evelyn." 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.Exclusion amount k.Replaced by a deduction. l.No correct match provided. -Credit for tax on prior transfers (under § 2013)

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 -Administration expenses attributable to handling the surviving spouse's share of the community property.

Which,if any,of the following statements does not reflect the current structure of the Federal transfer tax system?

After 2004,the credit for state death taxes paid was replaced with a deduction.