Exam 18: The Federal Gift and Estate Taxes

Prior to her death in 2013, Alma made the following gifts. Fair Market Value As a result of the 2011 transfer, Alma paid a gift tax of $70,000. As to these transactions, Alma's gross estate includes:

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. -State income taxes accrued prior to death.

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. -Payment of unpaid gift taxes.

Cary and Bo are husband and wife. Using their community funds, they create a trust, life estate to Bo, remainder to their children. Four years later, Cary predeceases Bo. Nothing as to this trust is included in Cary's gross estate.

In which, if any, of the following independent situations has Trent made a gift?

Pauline sells antique furniture to her daughter, Nicole, for $10,000. If the furniture is really worth $100,000, Pauline has made a gift to Nicole of $100,000.

For Federal estate tax purposes, the gross estate cannot include property the decedent no longer owns.

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. Death does not defeat an owner's interest in property. c. Exists only if husband and wife are involved. d. A type of state tax on transfers by death. e. Must decrease the amount of the gross estate. 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. Exemption equivalent. k. Bypass amount. l. No correct match provided. -Future interest

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

Under his grandfather's will, Tad is entitled to receive shares of Kroger Corporation. For Federal tax purposes, Tad is allowed to disclaim some of these shares and accept the others.

The IRS does not consider property settlements in consideration of marriage as being transfers for valuable consideration. Consequently, such prenuptial settlements are subject to the Federal gift tax. Why, then, are property settlements incident to divorce exempt from the gift tax?

Matt and Patricia are husband and wife and live in Oregon. In 1980 and using her funds, Patricia purchases a residence for $400,000, listing title to the property as "Matt and Patricia, joint tenants with right of survivorship." In 2013, Matt dies first when the residence is worth $2 million. A correct statement as to these transactions is:

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.

Lyle and Kelly are brother and sister. Using his funds, Lyle purchases land, listing title as: "Lyle and Kelly, joint tenants with right of survivorship." If Kelly dies first, none of the land is included in her gross estate.

In which, if any, of the following independent situations can the alternate valuation date be elected? Value of Gross Estate Estate Tax Result E) None of the above

In 2014, grandparents contribute jointly owned funds to a § 529 qualified tuition plan on behalf of their granddaughter. The maximum annual exclusion allowed to them is $140,000 ($28,000 × 5 years).

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. Death does not defeat an owner's interest in property. c. Exists only if husband and wife are involved. d. A type of state tax on transfers by death. e. Must decrease the amount of the gross estate. 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. Exemption equivalent. k. Bypass amount. l. No correct match provided. -Inheritance tax

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, or a QTIP election must be made.

Lily pays for her grandson's college expenses. Under what conditions might such payments not be a gift?

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. Death does not defeat an owner's interest in property. c. Exists only if husband and wife are involved. d. A type of state tax on transfers by death. e. Must decrease the amount of the gross estate. 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. Exemption equivalent. k. Bypass amount. l. No correct match provided. -Federal gift tax