Question 1

Interest-free or below-market loans

Accepted Answer

A) must always have interest imputed on them. 
B) may result in treating the borrower as paying interest. 
C) result in treating the entire loan proceeds as a gift. 
D) will always result in at least $1,000 of interest income being imputed. 
A) must always have interest imputed on them. 
B) may result in treating the borrower as paying interest. 
C) result in treating the entire loan proceeds as a gift. 
D) will always result in at least $1,000 of interest income being imputed.

Question 2

The gift tax is a wealth transfer tax that applies to transfers during a person's lifetime and transfers at death.

Accepted Answer

A) True 
 B)False

Question 3

Identify which of the following statements is false.

Accepted Answer

A) The marital deduction for gift tax purposes is limited to one-half the value of the property transferred. 
B) The marital deduction is generally allowed since the transfer remains within the economic (husband/wife)unit. 
C) The marital deduction for gift tax purposes is limited to the amount of the includible gift (e.g. ,the amount of the gift that is in excess of the annual exclusion). 
D) Transfers of community property are eligible for the marital exclusion. 
A) The marital deduction for gift tax purposes is limited to one-half the value of the property transferred. 
B) The marital deduction is generally allowed since the transfer remains within the economic (husband/wife)unit. 
C) The marital deduction for gift tax purposes is limited to the amount of the includible gift (e.g. ,the amount of the gift that is in excess of the annual exclusion). 
D) Transfers of community property are eligible for the marital exclusion.

Question 4

Gordon died on January 1 and by his will left land with an adjusted basis of $60,000 and an FMV of $100,000 to Becky.Becky disclaims the property on December 31 of the year of death,when the land was still worth $100,000.Becky has made a gift (before the annual gift tax exclusion)of

Accepted Answer

A) $100,000. 
B) $60,000. 
C) $50,000. 
D) $0. 
A) $100,000. 
B) $60,000. 
C) $50,000. 
D) $0.

Question 5

The purchase of a $15,000 engagement ring generates a taxable gift necessitating the filing of a gift tax return.

Accepted Answer

A) True 
 B)False

Question 6

Elaine loaned her brother,Mike,$175,000 to purchase a new home.Elaine does not charge Mike any interest on the loan.What are the tax consequences to Elaine and Mike?

Accepted Answer

A) Elaine is treated as having made a gift of the forgone interest on the $175,000 loan to Mike. 
B) Elaine only has to impute interest on $75,000 of the loan to Mike. 
C) If Mike has no net investment income,Elaine does not have to treat the forgone interest as a gift. 
D) Mike can deduct the interest that he is deemed to have paid Elaine. 
A) Elaine is treated as having made a gift of the forgone interest on the $175,000 loan to Mike. 
B) Elaine only has to impute interest on $75,000 of the loan to Mike. 
C) If Mike has no net investment income,Elaine does not have to treat the forgone interest as a gift. 
D) Mike can deduct the interest that he is deemed to have paid Elaine.

Question 7

A Sec."2503(c)trust"

Accepted Answer

A) is a discretionary trust for a beneficiary of any age. 
B) is intended for beneficiaries over the age of 20. 
C) requires distribution of trust assets to the beneficiary at age 21. 
D) can be formed only by the parent(s)of the beneficiaries. 
A) is a discretionary trust for a beneficiary of any age. 
B) is intended for beneficiaries over the age of 20. 
C) requires distribution of trust assets to the beneficiary at age 21. 
D) can be formed only by the parent(s)of the beneficiaries.

Question 8

In 2014,Letty makes taxable gifts totaling $4 million.Her only other taxable gifts amount to $1 million,all of which were made in 2009.What is Letty's 2012 gift tax liability before the unified credit?

Accepted Answer

A) $2,220,800 
B) $1,875,000 
C) $1,840,800 
D) $1,600,000 
A) $2,220,800 
B) $1,875,000 
C) $1,840,800 
D) $1,600,000

Question 9

A gift-splitting election

Accepted Answer

A) requires each spouse to give property. 
B) may reduce the amount of the taxable gifts of the donor-decedent. 
C) results in a $6,500 per donee annual exclusion for each spouse. 
D) is binding on future years. 
A) requires each spouse to give property. 
B) may reduce the amount of the taxable gifts of the donor-decedent. 
C) results in a $6,500 per donee annual exclusion for each spouse. 
D) is binding on future years.

Question 10

Identify which of the following statements is false.

Accepted Answer

A) A power of appointment exists when a person transfers property and grants someone else the power to specify who eventually will receive the property. 
B) A person possesses a general power of appointment if the person has the power to appoint property to himself,his creditors,his estate,or the creditors of his estate. 
C) The donee's payment of the gift tax does not reduce the amount of the gift because it is treated as consideration paid to the donor. 
D) The donor must recognize as a gain the excess of the gift tax payable over the adjusted basis of the property. 
A) A power of appointment exists when a person transfers property and grants someone else the power to specify who eventually will receive the property. 
B) A person possesses a general power of appointment if the person has the power to appoint property to himself,his creditors,his estate,or the creditors of his estate. 
C) The donee's payment of the gift tax does not reduce the amount of the gift because it is treated as consideration paid to the donor. 
D) The donor must recognize as a gain the excess of the gift tax payable over the adjusted basis of the property.

Question 11

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?

Accepted Answer

•Do the estate freeze rules apply to thi

Question 12

Jennifer and Terry,a married couple,live in Illinois;which is a common law state.In the current year,Terry gives his sister $200,000 cash.Jennifer and Terry agree to gift splitting.Neither Jennifer nor Terry has made any taxable gifts in prior years.What are Jennifer and Terry's taxable gifts?

Accepted Answer

Since they elect gift splitting,each spo

Question 13

Identify which of the following statements is false.

Accepted Answer

A) A future interest includes reversions,remainders,and other interests,which are limited to commence in use,possession,or enjoyment at some future date or time. 
B) The gift tax exclusion is available only for a gift of a present interest. 
C) A trust for a minor (Sec.2503(c)trust)must distribute all of its income currently in order to qualify for the annual exclusion. 
D) For a transfer made in trust,each beneficiary is deemed to be a separate donee. 
A) A future interest includes reversions,remainders,and other interests,which are limited to commence in use,possession,or enjoyment at some future date or time. 
B) The gift tax exclusion is available only for a gift of a present interest. 
C) A trust for a minor (Sec.2503(c)trust)must distribute all of its income currently in order to qualify for the annual exclusion. 
D) For a transfer made in trust,each beneficiary is deemed to be a separate donee.

Question 14

Which of the following transactions constitutes a completed gift made by Ellen,a widow,in the current year?

Accepted Answer

A) Ellen deposits $100,000 cash and Matt deposits $5,000 cash into a joint savings account.Matt does not withdraw anything during the current year. 
B) Ellen names Larry the beneficiary of a $100,000 life insurance policy on Ellen's life.The beneficiary designation is revocable. 
C) Ellen transfers property to a revocable trust,naming the bank as trustee.The trustee must pay out all the income to Ed over Ed's lifetime,beginning next year. 
D) Ellen reimburses her granddaughter $15,000 for her tuition at medical school. 
A) Ellen deposits $100,000 cash and Matt deposits $5,000 cash into a joint savings account.Matt does not withdraw anything during the current year. 
B) Ellen names Larry the beneficiary of a $100,000 life insurance policy on Ellen's life.The beneficiary designation is revocable. 
C) Ellen transfers property to a revocable trust,naming the bank as trustee.The trustee must pay out all the income to Ed over Ed's lifetime,beginning next year. 
D) Ellen reimburses her granddaughter $15,000 for her tuition at medical school.

Question 15

Calvin transfers land to a trust.His daughter Melissa will receive the income from the land for ten years.After ten years,the land is returned to Calvin.Calvin's interest is

Accepted Answer

A) a term certain. 
B) a life estate. 
C) a reversionary interest. 
D) none of the above. 
A) a term certain. 
B) a life estate. 
C) a reversionary interest. 
D) none of the above.

Question 16

Discuss the statutory exemptions from the gift tax.

Accepted Answer

Payments of medical expenses and college

Question 17

Connie has some acreage that is valued at $1,500,000.Her daughter would like to build a home on it,but can only afford $500,000.Connie agrees to sell it to her daughter for $500,000.Is there any gift tax consequence as a result of this transaction?

Accepted Answer

Connie is considered to have made a gift

Question 18

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?

Accepted Answer

Section 2503(e)exempts the pay

Question 19

Identify which of the following statements is false.

Accepted Answer

A) If an individual transfers property in trust and reserves the right to the trust's income for life,the individual retains a life estate. 
B) An individual who receives a remainder interest will receive property after the death of the holder of a life estate. 
C) If a grantor transfers property in trust and names a beneficiary to receive only a term-certain interest and then the property is to return to the grantor,the transaction is not subject to gift tax. 
D) Life estates are valued using actuarial tables. 
A) If an individual transfers property in trust and reserves the right to the trust's income for life,the individual retains a life estate. 
B) An individual who receives a remainder interest will receive property after the death of the holder of a life estate. 
C) If a grantor transfers property in trust and names a beneficiary to receive only a term-certain interest and then the property is to return to the grantor,the transaction is not subject to gift tax. 
D) Life estates are valued using actuarial tables.

Question 20

Ward and June decide to divorce after 30 years of marriage.Ward transfers $500,000 to June in settlement of her property rights.What are the gift tax consequences of this transfer?

Accepted Answer

Ward is not deemed t

Interest-free or below-market loans

The gift tax is a wealth transfer tax that applies to transfers during a person's lifetime and transfers at death.

Identify which of the following statements is false.

Gordon died on January 1 and by his will left land with an adjusted basis of $60,000 and an FMV of $100,000 to Becky.Becky disclaims the property on December 31 of the year of death,when the land was still worth $100,000.Becky has made a gift (before the annual gift tax exclusion)of

The purchase of a $15,000 engagement ring generates a taxable gift necessitating the filing of a gift tax return.

Elaine loaned her brother,Mike,$175,000 to purchase a new home.Elaine does not charge Mike any interest on the loan.What are the tax consequences to Elaine and Mike?

A Sec."2503(c)trust"

In 2014,Letty makes taxable gifts totaling $4 million.Her only other taxable gifts amount to $1 million,all of which were made in 2009.What is Letty's 2012 gift tax liability before the unified credit?

A gift-splitting election

Identify which of the following statements is false.

Jennifer and Terry,a married couple,live in Illinois;which is a common law state.In the current year,Terry gives his sister $200,000 cash.Jennifer and Terry agree to gift splitting.Neither Jennifer nor Terry has made any taxable gifts in prior years.What are Jennifer and Terry's taxable gifts?

Identify which of the following statements is false.

Which of the following transactions constitutes a completed gift made by Ellen,a widow,in the current year?

Calvin transfers land to a trust.His daughter Melissa will receive the income from the land for ten years.After ten years,the land is returned to Calvin.Calvin's interest is

Discuss the statutory exemptions from the gift tax.

Connie has some acreage that is valued at $1,500,000.Her daughter would like to build a home on it,but can only afford $500,000.Connie agrees to sell it to her daughter for $500,000.Is there any gift tax consequence as a result of this transaction?

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?

Identify which of the following statements is false.

Ward and June decide to divorce after 30 years of marriage.Ward transfers $500,000 to June in settlement of her property rights.What are the gift tax consequences of this transfer?

Tax Research

Corporate Formations and Capital Structure

The Corporate Income Tax

Corporate Nonliquidating Distributions

Other Corporate Tax Levies

Corporate Liquidating Distributions

Corporate Acquisitions and Reorganizations

Consolidated Tax Returns

Partnership Formation and Operation

Special Partnership Issues

US Corporations

The Estate Tax

Income Taxation of Trusts and Estates

Administrative Procedures

Us Taxation of Foreign-Related Transactions

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Exam 12: The Gift Tax

Interest-free or below-market loans

The gift tax is a wealth transfer tax that applies to transfers during a person's lifetime and transfers at death.

Identify which of the following statements is false.

Gordon died on January 1 and by his will left land with an adjusted basis of $60,000 and an FMV of $100,000 to Becky.Becky disclaims the property on December 31 of the year of death,when the land was still worth $100,000.Becky has made a gift (before the annual gift tax exclusion)of

The purchase of a $15,000 engagement ring generates a taxable gift necessitating the filing of a gift tax return.

Elaine loaned her brother,Mike,$175,000 to purchase a new home.Elaine does not charge Mike any interest on the loan.What are the tax consequences to Elaine and Mike?

A Sec."2503(c)trust"

In 2014,Letty makes taxable gifts totaling $4 million.Her only other taxable gifts amount to $1 million,all of which were made in 2009.What is Letty's 2012 gift tax liability before the unified credit?

A gift-splitting election

Identify which of the following statements is false.

Jennifer and Terry,a married couple,live in Illinois;which is a common law state.In the current year,Terry gives his sister $200,000 cash.Jennifer and Terry agree to gift splitting.Neither Jennifer nor Terry has made any taxable gifts in prior years.What are Jennifer and Terry's taxable gifts?

Identify which of the following statements is false.

Which of the following transactions constitutes a completed gift made by Ellen,a widow,in the current year?

Calvin transfers land to a trust.His daughter Melissa will receive the income from the land for ten years.After ten years,the land is returned to Calvin.Calvin's interest is

Discuss the statutory exemptions from the gift tax.

Connie has some acreage that is valued at $1,500,000.Her daughter would like to build a home on it,but can only afford $500,000.Connie agrees to sell it to her daughter for $500,000.Is there any gift tax consequence as a result of this transaction?

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?

Identify which of the following statements is false.

Ward and June decide to divorce after 30 years of marriage.Ward transfers $500,000 to June in settlement of her property rights.What are the gift tax consequences of this transfer?

Tax Research

Corporate Formations and Capital Structure

The Corporate Income Tax

Corporate Nonliquidating Distributions

Other Corporate Tax Levies

Corporate Liquidating Distributions

Corporate Acquisitions and Reorganizations

Consolidated Tax Returns

Partnership Formation and Operation

Special Partnership Issues

US Corporations

The Estate Tax

Income Taxation of Trusts and Estates

Administrative Procedures

Us Taxation of Foreign-Related Transactions

Filters