Question 1

An exemption equivalent is the amount of annual gifts that is automatically exempt from the gift tax.

Accepted Answer

A) True 
 B)False  False

Question 2

The gross estate will not include the value of clothes and other personal items owned by the decedent at the time of death.

Accepted Answer

A) True 
 B)False  False

Question 3

This year Alex's friend, Kimberly, was disabled. Alex paid $25,000 to Kimberly's doctor for medical expenses. In addition, Alex also paid $15,000 to Kimberly so that her son could afford tuition at State University this year. Has Alex made taxable gifts, and if so, in what amounts?

Accepted Answer

The payment to Kimberly was a taxable gift of $1,000.
Explanation: Both payments were complete gifts, but payments for medical expenses and education are exempt from the gift tax as long as the payments were made directly to the college or doctor.

Question 4

In order for a transfer to be treated as a completed gift the transfer must be irrevocably relinquished by the donor.

Accepted Answer

A) True 
 B)False

Question 5

The Federal transfer taxes are calculated using cumulative lifetime transfers.

Accepted Answer

A) True 
 B)False

Question 6

A trust is a legal entity whose purpose is to hold and administer property for beneficiaries.

Accepted Answer

A) True 
 B)False

Question 7

A gratuitous transfer of property made during the lifetime of the donor is called:

Accepted Answer

A) an incomplete gift. 
B) a testamentary transfer. 
C) a taxable gift. 
D) an intervivos transfer. 
E) All of these. 
A) an incomplete gift. 
B) a testamentary transfer. 
C) a taxable gift. 
D) an intervivos transfer. 
E) All of these.

Question 8

Which of the following is a true statement?

Accepted Answer

A) Leaving all property to the surviving spouse maximizes the marital deduction and therefore minimizes total transfer taxes on the estates of both spouses. 
B) A bypass provision in the will of the deceased spouse is designed to use the unified credit of the deceased spouse by transferring property to beneficiaries other than the surviving spouse. 
C) Serial gifts are limited in scope because only $10,000 can be transferred each year tax-free to any specific donee. 
D) Serial gifts can move significant amounts of wealth only if employed by multiple donors. 
E) None of these is true. 
A) Leaving all property to the surviving spouse maximizes the marital deduction and therefore minimizes total transfer taxes on the estates of both spouses. 
B) A bypass provision in the will of the deceased spouse is designed to use the unified credit of the deceased spouse by transferring property to beneficiaries other than the surviving spouse. 
C) Serial gifts are limited in scope because only $10,000 can be transferred each year tax-free to any specific donee. 
D) Serial gifts can move significant amounts of wealth only if employed by multiple donors. 
E) None of these is true.

Question 9

The debts of the decedent at the time of death are deducted in calculating the taxable estate.

Accepted Answer

A) True 
 B)False

Question 10

For 2016, the exemption equivalent for the estate tax is $5.45 million.

Accepted Answer

A) True 
 B)False

Question 11

No deductions are allowed when calculating the taxable estate.

Accepted Answer

A) True 
 B)False

Question 12

At her death Tricia owned a life insurance policy on her life that paid her daughter $500,000 upon her death. The policy was only valued at $25,000 prior to Tricia's death. What amount, if any, is included in Tricia's gross estate?

Accepted Answer

A) $500,000 
B) $25,000 
C) $25,000 if Tricia transferred ownership of the policy within three years of her date of death. 
D) zero - life insurance proceeds due to the death of the decedent are not included in the decedent's gross estate. 
E) zero if Tricia's daughter refused to accept the proceeds. 
A) $500,000 
B) $25,000 
C) $25,000 if Tricia transferred ownership of the policy within three years of her date of death. 
D) zero - life insurance proceeds due to the death of the decedent are not included in the decedent's gross estate. 
E) zero if Tricia's daughter refused to accept the proceeds.

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

The testamentary transfer of property to a qualified charity is deductible in calculating the taxable estate without any ceiling limitation.

Accepted Answer

A) True 
 B)False

Question 15

Ethan owned a vacation home at the time of his death. Which of the following is a true statement if Ethan was married to Emma and resided in a common law state at the time of his death?

Accepted Answer

A) Ethan can claim a marital deduction for the vacation home if he bequeaths it to Emma. 
B) Ethan cannot claim a marital deduction if he bequeaths a life estate in the vacation home to Emma. 
C) Ethan can claim a marital deduction for half the value of the vacation home if it was owned with Emma in joint tenancy with the right of survivorship. 
D) Ethan can claim a charitable deduction if he bequeaths it to a qualified charity. 
E) All of these are true. 
A) Ethan can claim a marital deduction for the vacation home if he bequeaths it to Emma. 
B) Ethan cannot claim a marital deduction if he bequeaths a life estate in the vacation home to Emma. 
C) Ethan can claim a marital deduction for half the value of the vacation home if it was owned with Emma in joint tenancy with the right of survivorship. 
D) Ethan can claim a charitable deduction if he bequeaths it to a qualified charity. 
E) All of these are true.

Question 16

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?

Accepted Answer

A) $32,000 
B) $37,000 
C) $56,000 
D) $61,000 
E) None of these. 
A) $32,000 
B) $37,000 
C) $56,000 
D) $61,000 
E) None of these.

Question 17

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?

Accepted Answer

A) $58,000 
B) $8,000 
C) $16,000 
D) $4,000 
E) None of these 
A) $58,000 
B) $8,000 
C) $16,000 
D) $4,000 
E) None of these

Question 18

Grace transferred $800,000 into trust with the income to be paid annually to her spouse, Isaiah, for life and the remainder to Taylor. Calculate the amount of the taxable gifts from the transfers.

Accepted Answer

$786,000
Explanation: The life estate is

Question 19

At his death in 2016, Nathan owned the following property:   
The real estate is subject to a $1,700,000 mortgage and Nathan made taxable gifts in 2009 totaling $2 million at which time he offset the gift tax with a unified credit (exemption equivalent of $2 million). Nathan has never been married. What is the amount of his estate tax due?

Accepted Answer

$4.22 million
Explanation: Nat

Question 20

A gratuitous transfer of cash to an individual who uses the cash to pay medical expenses is not subject to a gift tax.

Accepted Answer

A) True 
 B)False

Exam 25: Transfer Taxes and Wealth Planning

An exemption equivalent is the amount of annual gifts that is automatically exempt from the gift tax.

The gross estate will not include the value of clothes and other personal items owned by the decedent at the time of death.

This year Alex's friend, Kimberly, was disabled. Alex paid $25,000 to Kimberly's doctor for medical expenses. In addition, Alex also paid $15,000 to Kimberly so that her son could afford tuition at State University this year. Has Alex made taxable gifts, and if so, in what amounts?

In order for a transfer to be treated as a completed gift the transfer must be irrevocably relinquished by the donor.

The Federal transfer taxes are calculated using cumulative lifetime transfers.

A trust is a legal entity whose purpose is to hold and administer property for beneficiaries.

A gratuitous transfer of property made during the lifetime of the donor is called:

Which of the following is a true statement?

The debts of the decedent at the time of death are deducted in calculating the taxable estate.

For 2016, the exemption equivalent for the estate tax is $5.45 million.

No deductions are allowed when calculating the taxable estate.

At her death Tricia owned a life insurance policy on her life that paid her daughter $500,000 upon her death. The policy was only valued at $25,000 prior to Tricia's death. What amount, if any, is included in Tricia's gross estate?

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

The testamentary transfer of property to a qualified charity is deductible in calculating the taxable estate without any ceiling limitation.

Ethan owned a vacation home at the time of his death. Which of the following is a true statement if Ethan was married to Emma and resided in a common law state at the time of his death?

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?

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?

Grace transferred $800,000 into trust with the income to be paid annually to her spouse, Isaiah, for life and the remainder to Taylor. Calculate the amount of the taxable gifts from the transfers.

A gratuitous transfer of cash to an individual who uses the cash to pay medical expenses is not subject to a gift tax.

An Introduction to Tax

Tax Compliance, the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Exemptions, and Filing Status

Gross Income and Exclusions

Individual Deductions

Investments

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Compensation

Retirement Savings and Deferred Compensation

Tax Consequences of Home Ownership

Entities Overview

Corporate Operations

Accounting for Income Taxes

Corporate Taxation: Nonliquidating Distributions

Corporate Formation, Reorganization, and Liquidation

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S Corporations

State and Local Taxes

The Us Taxation of Multinational Transactions

Filters