Exam 18: The Federal Gift and Estate Taxes

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.

In 2000,Dale and Andrea acquire real estate for $1,000,000,with Dale furnishing $300,000 of the purchase price and Andrea providing the balance.Title to the property is listed as: "Dale and Andrea,equal tenants in common." Dale dies first in 2012,when the real estate is worth $3,000,000.

Which,if any,of the following is not a characteristic of the Federal gift tax?

Transfers to political organizations are exempt from the application of the Federal gift tax.

If interest is provided for in loans between related parties,there is no imputed interest,as a gift loan does not result.

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

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

The current $5.12 million exemption equivalent is not permanent but is scheduled to expire after 2012.

At the time of his death,Norton was involved in the following transactions. What amount is included in Norton's gross estate?

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.

Gerald and Pat are husband and wife and live in New York.Using joint funds,in 1990 they purchase an insurance policy on Gerald's life and designate their daughter,Marie,as the beneficiary.The policy has a maturity value of $4,000,000.Gerald dies first in 2012 and the insurance proceeds are paid to Marie.As to the proceeds:

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

Cliff loans his adult daughter,Stella,a large sum of money to enable her to start her own business.The loan is evidenced by a note,and no interest is provided for or repayment date specified.What are the potential tax ramifications of this arrangement to Cliff and Stella?

In 1995,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 1999,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 2012 when the land is worth $1.5 million and the apartment building is worth $2 million.One of the results of these transactions is:

As a result of an auto accident from which she later died,Irene totaled a Bentley worth $95,000.If the insurance company covers $60,000 of the loss,Irene's estate can claim a deduction of $35,000 in arriving at the taxable estate.

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?

Under the alternate valuation date election,each asset in the gross estate is valued at the lesser of the date of death value or six months thereafter.

At the time of his death on August 7,2012,Michael owned the following assets. How much,as to these transactions,is included in Michael's gross estate?

For Federal estate tax purposes,the gross estate may include property the decedent does not own.

Sometimes also known as transaction taxes,Federal gift and estate taxes are excise taxes.