Exam 27: The Federal Gift and Estate Taxes

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.

The Federal transfer taxes generally apply a flat rate of:

Classify each statement appearing below. a. No taxable transfer occurs b. Gift tax applies c. Estate tax applies -Under her father's will, Faith is to receive 10,000 shares of GE common stock. Eight months after her father's death, Faith disclaims the 10,000 shares.

Classify each statement appearing below. a. No taxable transfer occurs b. Gift tax applies c. Estate tax applies -Clarence pays the medical providers (e.g., physicians, hospital) for his aunt's knee replacement operation. The aunt does not qualify as Clarence's dependent.

Classify each statement appearing below. a. No taxable transfer occurs b. Gift tax applies c. Estate tax applies -Howard establishes a trust, life estate to his children, remainder to the grandchildren. Under its terms, the trust is revocable by Howard.

In 2005, 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 2012 when the trust is worth $1,500,000, and Paula dies in 2018 when the trust is worth $2,000,000. Which, if any, of the following is a correct statement?

In which of the following independent situations has Jean made a gift?

Classify each of the independent statements appearing below. a. Some or all of the asset is included in the decedent's gross estate. b. None of the asset is included in the decedent's gross estate. -Interest on municipal bonds accrued after death.

At the time of his death, Jason was a participant in Silver Corporation's qualified pension plan and group term life insurance. The balance of the survivorship feature in his pension plan is: The term insurance has a maturity value of $100,000. All amounts are paid to Pam, Jason's daughter. One result of these transactions is:

Stacey inherits unimproved land (fair market value of $6 million) from her father on June 1, 2017. Stacey disclaims her interest in the property as follows: one-third on December 1, 2017? one-third on January 3, 2018? and the remaining one-third on May 31, 2018. In all cases, the disclaimers pass the interest to her son (the next heir under state law). The Federal gift tax applies to Stacey for:

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. -Post-death property taxes paid to the county on realty included in the gross estate.

In 2004, Katelyn inherited considerable property when her father died. When Katelyn dies in 2018, her estate may be able to claim a credit as to some of the estate taxes paid by her father's estate.

In 2015, Noah and Kelly acquire real estate for $2,000,000, with Noah furnishing $400,000 of the purchase price and Kelly providing the balance. Title to the property is listed as: "Noah and Kelly, equal tenants in common." Noah dies first in 2019, when the real estate is worth $4,000,000. a. Were there any tax consequences in 2015? Explain. b. How much, as to the real estate, is included in Noah's gross estate? c. As to parts a. and b., would it make any difference whether Noah and Kelly are brother and sister or husband and wife?

At the time of his death, Raul owned a residence with his wife, Manuela, as joint tenants. The residence was purchased by Manuela ten years ago at a cost of $300,000 and has a fair market value of $1.4 million. Raul's estate will be allowed no marital deduction as to the property.

Classify each statement appearing below. a. No taxable transfer occurs b. Gift tax applies c. Estate tax applies -Meg gives her 18-year-old son money for his college tuition and living expenses (e.g., room and board).

Classify each statement appearing below. a. No taxable transfer occurs b. Gift tax applies c. Estate tax applies -In full settlement of her marital rights, Henry transfers property to his wife, Nancy. Three months later, Henry and Nancy are divorced.

At the time of Dylan's death, he was a resident of the United States. He owns land located in a foreign country, which is subject to that country's estate tax. This same land also can be subject to the Federal estate tax.

At the time of his death on August 7, Michael owned the following assets. ? Green Corporation stock (cost $700,000, FMV $950,000). On July 20, Green declared a cash dividend, payable on August 17 to all shareholders as of the record date of August 8. Michael's executor receives the $64,000 dividend on the scheduled payment date. ? Note receivable (face amount $600,000) payable on demand. The note was received by Michael two years previously from his daughter Addison. Addison used the loan to start a business which currently is very successful. In his will, Michael forgives the note. How much, as to these transactions, is included in Michael's gross estate?

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. -Mortgage on land included in gross estate and willed to decedent's children.

A lifetime transfer that is supported by full and adequate consideration is not a gift.