Exam 14: Transfer Taxes and Wealth Planning

A present interest is the right to currently enjoy property or receive income payments from property.

The estate and gift taxes share several common features. Which of the following characteristics is common to both the estate and gift taxes?

Matthew and Addison are married and live in Michigan, a common-law state. For the holidays Addison gave cash gifts of $30,000 to each of her two sons, and Matthew gave $40,000 to his daughter. What is the amount of Addison's taxable gifts if Matthew and Addison opt to gift split?

The executor of Isabella's estate incurred administration expenses of $32,000 and paid $5,000 in funeral expenses. The executor charged the estate for $24,000 in fees. What is the maximum amount Isabella's estate can deduct in computing the adjusted gross estate?

Which of the following is a true statement?

Last year Brandon opened a savings account with a deposit of $45,000. The account was in the name of Brandon and Melanie, joint tenancy with the right of survivorship. Melanie did not contribute to the account, but this year she withdrew $18,000. Has Brandon made a taxable gift to Melanie, and if so, in what amount?

Ryan placed $280,000 in trust with income to Stephen for his life and the remainder to Kayla (or her estate). At the time of the gift, given the prevailing interest rate, Stephen's life estate was valued at $165,000 and the remainder at $115,000. What is the amount, if any, of Ryan's taxable gifts?

The gross estate may contain property transfers that are not included in the probate estate.

This year Maria transferred $600,000 to an irrevocable trust that pays equal shares of income annually to four cousins (or their estates) for the next eight years. At that time, the trust is terminated and the corpus of the trust reverts to Maria. Determine the amount, if any, of the current gifts and the taxable gifts if the relevant interest rate is 6 percent and Maria is married and elects to gift-split with her spouse?

A transfer of a terminable interest will not generally qualify for a marital deduction.

Which of the following transfers is a completed gift?

A bypass provision in a will requires a decedent to have a taxable estate in order to use a unified credit to reduce total estate taxes on a married couple.

The marital and charitable deductions are common to both the estate tax and the gift tax formulas.

The gross estate always includes the value of half of any real property owned by a decedent and another person in joint tenancy with the right of survivorship.

Ricardo transferred $1,000,000 of cash to State University for a new sports complex. Calculate the amount of the taxable gift.

This year Nathan transferred $2 million to an irrevocable trust established for the benefit of his nephew. The trustee is directed to accumulate income for the next 5 years before distributing the trust corpus to Nathan's nephew. In past years Nathan has made taxable gifts of $6 million and used a unified credit on an exemption equivalent of $5 million. What amount of gift tax, if any, must Nathan remit?

The gift tax is imposed on intervivos (lifetime) transfers.

Christian transferred $60,000 to an irrevocable trust for the benefit of his three daughters. The three daughters share income equally for five years and then the corpus of the trust is to be divided equally between them. What is the amount of the taxable gifts, if any, made by Christian?

Andrew and Brianna are married and live in Texas, a community property state. For their birthdays this year Andrew gave cash gifts of $20,000 to each of his two daughters, and Brianna gave $30,000 to her niece. What is the amount of Andrew's taxable gifts?

At his death Trevor had a probate estate consisting of $4 million of property. Which of the following is a true statement about Trevor's estate or estate tax?