Exam 17: The Federal Gift and Estate Taxes

In 1997,Katelyn inherited considerable property when her father died. When Katelyn dies in 2008,her estate may be able to use § 2013 (credit for tax on prior transfers)as to some of the estate taxes paid by her father's estate.

Which,if any,of the following items is subject to indexation (adjusted to reflect inflation)?

Jason and Emma are brother and sister.Using his funds,Jason purchases land,listing title as: "Jason and Emma,joint tenants with right of survivorship." If Jason dies first,one-half is included in his gross estate as to the land.

The purpose of the marital deduction is to place married decedents in common law states on par with those in community property jurisdictions.

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 -Proceeds of an insurance policy on decedent's life.Decedent's son purchased the policy and is its owner and beneficiary.

Classify each statement appearing below. a.No taxable transfer occurs b.Gift tax applies c.Estate tax applies -Van takes out an insurance policy on his life and designates Myrna as the beneficiary.Myrna dies first.

What is the justification for the terminable interest rule that is applicable to the marital deduction?

A marital deduction can be allowed even if the surviving spouse is a nonresident alien.

At the time of his death,Ethan held a traditional IRA account with his wife as the designated beneficiary.As to the IRA,none of it is included in Ethan's gross estate.

Classify each statement appearing below. a.No taxable transfer occurs b.Gift tax applies c.Estate tax applies -Hugh loans his adult daughter,Nadia,$800,000 to start her own business.Market rate interest is provided for,and Nadia signs a note that is payable in four years.Hugh dies two years later and,in his will,cancels the note.Nadia's business proved to be successful.

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

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 -Ten cemetery lots purchased by decedent prior to death for use by himself and his family.

Interest on state and local bonds is subject to neither the Federal income tax nor the Federal estate tax.

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.

Manfredo makes a donation of $50,000 to the church where he was baptized in Mexico City.The gift does not qualify as a charitable contribution for Federal income tax purposes.

To avoid the terminable interest limitation on the marital deduction,the surviving spouse must be granted a general power of appointment over the trust property,and a QTIP election must be made.

Classify each statement appearing below. a.No taxable transfer occurs b.Gift tax applies c.Estate tax applies -Hector transfers funds to his aunt so she can obtain a much needed heart bypass operation.The aunt does not qualify as Hector's dependent.

In determining whether a dividend issued on stock held by a decedent is included in the gross estate,the record date (rather than the declaration or payment dates)controls.

Frank owns an insurance policy on the life of Cynthia,with Leon as the designated beneficiary.Upon Cynthia's prior death,Frank is treated as making a gift of the insurance proceeds to Leon.

Becky made taxable gifts in 1974,1986,and 2008.In computing the gift tax on the 2008 gift,she must consider all of the prior taxable gifts.