Exam 18: The Federal Gift and Estate Taxes

In 2000, Irv creates a revocable trust, income payable to his children for life, remainder to his grandchildren. In 2011, Irv relinquishes the power to revoke the trust. If Irv dies in 2013, the trust is not included in his gross estate.

Which, if any, of the following is a correct statement regarding the filing of a gift tax return (Form 709)?

In the past, the amount of the unified tax credit always has been the same for both transfers by gift and transfers by death.

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.

To make the election to split gifts under § 2513, spouses must file a Form 709 (Federal gift tax return).

Sally's will passes real estate to Otto (her surviving spouse). The real estate is worth $800,000 but is subject to a mortgage of $200,000. The transfer provides Sally's estate with a marital deduction of $600,000.

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. -Land held as tenants by the entirety with surviving spouse. Decedent provided none of the funds.

Using his separate funds, Wilbur purchases an annuity which pays him a specified amount until death. Upon Wilbur's prior death, a reduced amount is to be paid to Marcia for her life. Marcia predeceases Wilbur. Nothing concerning the annuity contract is included in Marcia's gross estate.

Generally, property that passes to a surviving spouse that is not a U.S. citizen does not qualify for the marital deduction. a. Why? b. How can this result be avoided?

In 1985, Drew creates a trust with $1,000,000 of securities. Under the terms of the trust, Paula (Drew's wife) is granted a life estate with remainder to their children. Drew makes a QTIP election as to the trust. Drew dies in 1992 when the trust is worth $1,500,000, and Paula dies in 2013 when the trust is worth $2,000,000. Which, if any, of the following is a correct statement?

In 2005, Thalia purchases land for $900,000 and lists title in the names of her daughters as follows: "April and Theresa, joint tenants with right of survivorship." In 2007, April and Theresa purchase an apartment building for $1 million as equal tenants in common; April furnished $400,000 and Theresa furnished $600,000 of the cost. April dies first in 2013 when the land is worth $1.5 million and the apartment building is worth $2 million. One of the results of these transactions is:

Cole purchases land for $500,000 and transfers it by gift to his two daughters, Madison and Paige, as equal joint tenants with the right of survivorship. Ten years later, when the land is worth $2,000,000, Madison predeceases Paige. Madison's executor includes none of the value of the land in her gross estate, as she contributed nothing toward its cost. Do you agree?

Barry pays State University for his dependent daughter's room and board. Barry has made a transfer that is subject to the Federal gift tax.

At the time of her death, Rita held a promissory note from a loan she had made to her son. If Rita's will forgives the loan, the note is not included in her gross estate.

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

The purpose of the marital deduction is to place married decedents in common law states on par with those in community property jurisdictions.

Paul, a U.S. citizen, will avoid the Federal estate tax if he becomes a Canadian resident and owns no property located in the U.S. at the time of his death.

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

Ben and Lynn are married and have four pre­teen grandchildren. They want to contribute to a § 529 plan on behalf of their education. For 2013, what is the maximum amount they can transfer to the plan without making a taxable gift?

In 2012, Glen transferred several assets by gift to different persons. Glen dies in 2014. Information regarding the properties given is summarized below. Fair Market Value 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: