Exam 17: The Federal Gift and Estate Taxes

Like the Federal estate tax,the generation skipping transfer tax (GSTT)is being phased out.

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. -Bypass amount

Tony and Crisesa are married and live in Vermont.In 1992,they purchase realty for $200,000 (Crisesa provides $150,000 and Tony $50,000)and list ownership as joint tenants with right of survivorship.In the current year,Tony dies first when the realty is worth $800,000.One result of these events is:

A transfer in trust in which the trustee has the power to accumulate income is a gift of a future interest even if the trustee never exercises the power.

The U.S.has death tax conventions (i.e.,treaties)with most of the countries of the world.

Two brothers,Sam and Bob,acquire real estate as equal tenants in common.Of the purchase price of $100,000,Sam furnished $40,000 while Bob provided the balance.If Bob dies five years later when the real estate is worth $300,000,his estate includes $180,000 as to the property.

In 2008,grandparents contribute jointly owned funds to a § 529 qualified tuition plan on behalf of their granddaughter.The maximum annual exclusion allowed to them is $60,000 ($12,000 * 5 years).

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 -Transportation cost for decedent and surviving son to site of burial.

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

Classify each statement appearing below. a.No taxable transfer occurs b.Gift tax applies c.Estate tax applies -Cash donation to the reelection campaign of a member of the U.S.Congress.

A lifetime transfer that is supported by full and adequate consideration is not a gift.

At the time of her death,Stefanie held a promissory note from a loan she had made to her son.If Stefanie's will forgives the loan,nothing regarding the note is included in her gross estate.

The Code contains § 2516 which exempts certain property settlements incident to a divorce from the application of the Federal gift tax.Why is this provision necessary?

The Federal estate tax cannot be imposed on a decedent who was neither a citizen nor resident of the U.S.

Lila is the owner and beneficiary of a policy on the life of her husband,Austin. Upon Austin's prior death,the insurance proceeds paid to Lila qualify for the marital deduction.

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. -Tenancy in common

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.

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 -State income tax refund received after death on a tax return filed before death.

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. -Totten trust

As a result of an auto accident which killed him,Mel totaled a Hummer worth $45,000.If the insurance company covers $30,000 of the loss,Mel's estate can claim a deduction of $15,000 in arriving at the taxable estate.