Exam 18: The Federal Gift and Estate Taxes

Manfredo makes a donation of $50,000 to the church where he was baptized in Mexico City. The gift does qualify as a charitable contribution for Federal income tax purposes.

In arriving at the taxable estate, expenses incurred in administering community property are deductible only in proportion to the deceased spouse's interest in the community.

Tom and Jean are husband and wife and live in California. In 1991, they use $400,000 of community funds to purchase an annuity from an insurance company. Under the terms of the contract, Tom is to receive $40,000 per year for life once he reaches age 65. If Jean outlives Tom, she is to receive $30,000 per year for life. Tom dies first in 2011 (and before reaching age 65). At this time, the value of Jean's interest is $500,000. As to this contract, Tom's gross estate includes:

At the time of his death in 2011, Leroy owed Federal income taxes on income earned in 2009. Leroy's estate cannot claim an estate tax deduction for the income tax it pays.

Georgia owns an insurance policy on the life of Jake, with Scarlet as the designated beneficiary. Upon Scarlet's prior death, no transfer tax consequences result.

Generally, property that passes to a surviving spouse that is not a U.S. citizen does not qualify for the marital deduction.

In 2009, Glen transferred several assets by gift to different persons. Glen dies in 2011. Information regarding the properties given is summarized below. The transfer of the land and the stocks and bonds resulted in a total gift tax of $60,000. As to these transactions, Glen's gross estate must include:

A father wants to give a parcel of land to his two children. If he wants the survivor to have sole ownership, he should list ownership of the property as joint tenants.

Mark dies on March 3, 2011. Which, if any, of the following items is not included in his gross estate?

Pursuant to Corey's will, Emma (Corey's sister) inherits his property. Emma dies later. The estate tax attributable to the inclusion of the property in Corey's gross estate was $300,000. The estate tax attributable to the inclusion of the property in Emma's gross estate is $400,000. Emma's credit for the tax on prior transfers (under§ 2013) is:

Under certain circumstances, the gift-splitting election can be made even though the electing spouses are no longer married to each other.

At the time of her death in 2011, Karla was a participant in her employer's qualified pension plan. Her accrued balance in the plan is: Karla also was covered by her employer's group term life insurance program. Her policy (maturity value of $200,000) is made payable to Scott (Karla's husband). Scott is also the designated beneficiary of the pension plan.

In his will, Hernando provides for $50,000 to go to the Madrid, Spain, school system. Even though it is a foreign charity, the bequest will qualify as a charitable deduction for estate tax purposes.

Harry and Brenda are husband and wife. Using his funds, Harry purchases real estate which he lists as: "Harry and Brenda, tenants by the entirety with right of survivorship." If Harry dies first, all of the real estate will be included in his gross estate.

For both the Federal gift and estate tax, a deduction is allowed for certain transfers to charity.

Sidney dies and leaves property to his sister Giselle. Thirty months later, Giselle dies. Under § 2013 (credit for tax on prior transfers), Giselle's estate can claim a full credit for any Federal estate taxes paid by Sidney's estate as to amounts passing to Giselle.

At the time of her death in 2011, Ruby was involved in three trust arrangements. Details regarding these trusts are summarized below. As to these trusts, how much will be included in Ruby's gross estate?

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

For estate tax purposes, a surviving spouse's share of the community property is handled in the same manner as a surviving spouse's dower interest.

Prior to his death in 2011, Alma made the following gifts. As a result of the 2010 transfer, Alma paid a gift tax of $70,000. As to these transactions, Alma's gross estate includes: