Exam 17: The Federal Gift and Estate Taxes

For year 2008,the unified transfer tax credit for estate tax purposes is lower than that applicable for gift tax purposes.

Classify each statement appearing below. a.No taxable transfer occurs b.Gift tax applies c.Estate tax applies -Maggie purchased an insurance policy on Jim's life and designated Susan as the beneficiary.Four years later Jim dies,and Susan collects the insurance proceeds.

Walt dies intestate (i.e.,without a will)in 2006 with a gross estate valued at $4,000,000.Under applicable state law,Walt's property passes to Kelly or to Belle,in that order.Kelly has an estimated net worth of $3,000,000 while Belle has none.From a tax planning standpoint,what course of action might be advisable.

In 2006 and with $100,000,Ronald establishes a joint savings account with his cousin,Allison. In 2008,Allison withdraws the $100,000 and disappears. Ronald made a gift to Allison in 2008.

Which,if any,of the following statements is incorrect?

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 -Cash dividends on stock owned by the decedent (declaration date preceded death but record date was after death).

Classify each statement appearing below. a.No taxable transfer occurs b.Gift tax applies c.Estate tax applies -Darlene holds a special power of appointment over the income from a trust created by her brother.During the year,Darlene exercises the power in favor of one of the beneficiaries designated in the trust instrument.

Homer and Laura are husband and wife.At the time of Homer's prior death,they owned the following: land as tenants by the entirety worth $2,000,000 (purchased by Homer)and stock as equal tenants in common worth $3,000,000 (purchased by Laura).Laura also owns an insurance policy on Homer's life (maturity value of $1,000,000)with herself as the designated beneficiary.Homer's will passes all his property to Laura.How much marital deduction is allowed Homer's estate?

Rudy owns an insurance policy on the life of his mother,Hope.Upon Hope's death,the policy proceeds of $2,000,000 are paid to the designated beneficiary,Faith.What are the tax consequences resulting from Hope's death based on the following assumptions? a.Faith is Rudy's daughter. b.Faith is Rudy's wife.

An estate tax is a tax on the right of an heir to receive property on the death of the owner.

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 -Bank account held as joint tenant with mother.Mother provided all of the funds.Mother survives.

Bernice dies and leaves property to her sister Yolanda.One year later,Yolanda dies.Under § 2013 (credit for tax on prior transfers),Yolanda's estate can claim a full credit for any Federal estate taxes paid by Bernice's estate as to amounts passing to Yolanda.

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 Myrna's life and designates himself as the beneficiary.Myrna is Van's wife.Two years later,Myrna dies,and Van collects the insurance proceeds.

Leroy made taxable gifts in 1970 and 2004.When Leroy dies in 2008,all of these gifts must be added to his taxable estate to arrive at the tax base for estate tax purposes.

At the time of her death,Abigail held a general power of appointment over a trust created by her grandmother in 1980.Since Abigail never exercised the general power,none of the trust is included in her gross estate.

A mother reimburses her son for the tuition he paid to attend college.A gift has occurred.

In his will,Hernando provides for $50,000 to go to the Madrid,Spain,school system.Since it is a foreign charity,the bequest will not qualify as a charitable deduction for estate tax purposes.

State law does not always control whether a transfer is subject to the Federal gift tax.

For Federal estate and gift tax purposes,the exclusion amount is the same thing as the bypass amount.

Kim,a resident and citizen of Korea,dies during an operation at the Mayo Clinic in Rochester (MN).Because Kim died in the U.S.,he will be subject to the Federal estate tax.