Question 1

Which of the following transfers is a completed gift?

Accepted Answer

A) Payment of child support by a former spouse. 
B) Transfer of property to a revocable trust. 
C) Transfer of cash to a bank account held in joint tenancy with the right of survivorship. 
D) Income paid to the beneficiary of a revocable trust. 
E) None of these is a completed gift. 
A) Payment of child support by a former spouse. 
B) Transfer of property to a revocable trust. 
C) Transfer of cash to a bank account held in joint tenancy with the right of survivorship. 
D) Income paid to the beneficiary of a revocable trust. 
E) None of these is a completed gift.

Question 2

Harold and Mary are married and live in a community property state. During the marriage Harold bought a parcel of real estate for $100,000 in community funds and titled the property in his name alone. Mary died on January 30th of this year and was survived by Harold who did not remarry. The parcel of real property was worth $250,000 on January 30th of this year but was only worth $220,000 at year end. What amount, if any, is included in Mary's gross estate?

Accepted Answer

A) $250,000 
B) $220,000 
C) $125,000 
D) $110,000 
E) zero - Mary had no ownership interest in the property at her death. 
A) $250,000 
B) $220,000 
C) $125,000 
D) $110,000 
E) zero - Mary had no ownership interest in the property at her death.

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

Christopher's residence was damaged by a storm during the administration of his estate. Christopher's executor paid $120,000 to repair the residence after the storm. Which of the following is a true statement?

Accepted Answer

A) A casualty loss of $120,000 can be deducted on Christopher's final individual income tax return. 
B) The casualty loss deduction is limited to the loss in excess of 10 percent of Christopher's AGI. 
C) Christopher's executor has the option of deducting a loss of $120,000 on the estate tax return or on the estate's income tax return. 
D) No casualty loss deduction is available for calculating the estate tax. 
E) None of these is true. 
A) A casualty loss of $120,000 can be deducted on Christopher's final individual income tax return. 
B) The casualty loss deduction is limited to the loss in excess of 10 percent of Christopher's AGI. 
C) Christopher's executor has the option of deducting a loss of $120,000 on the estate tax return or on the estate's income tax return. 
D) No casualty loss deduction is available for calculating the estate tax. 
E) None of these is true.

Question 5

Including adjusted taxable gifts in the taxable estate causes these gifts to be taxed twice, once under the gift tax and again under the estate tax.

Accepted Answer

A) True 
 B)False

Question 6

Natalie transferred $500,000 of bonds to a revocable trust with directions to the trustee to pay income to her aunt for five years after which the corpus is to be distributed to Natalie's niece. At year end, the trustee paid $15,000 of income to the aunt. Which of the following is a true statement?

Accepted Answer

A) Natalie has made a completed gift of $500,000. 
B) Natalie has made a taxable gift of $1,000. 
C) Natalie has not made a completed gift because the trust is revocable. 
D) Natalie has made a taxable gift of $474,000. 
E) None of these. 
A) Natalie has made a completed gift of $500,000. 
B) Natalie has made a taxable gift of $1,000. 
C) Natalie has not made a completed gift because the trust is revocable. 
D) Natalie has made a taxable gift of $474,000. 
E) None of these.

Question 7

Jonathan transferred $90,000 of cash to a trust this year for the benefit of Hannah, age 10. The trustee has the discretion to distribute income or corpus (principal) for Hannah's benefit and is required to distribute all assets to Hannah (or her estate) not later than Hannah's 21st birthday. What is the amount of the taxable gift?

Accepted Answer

A) $90,000 
B) $76,000 
C) $64,000 
D) zero - there is no completed gift until the trustee makes a distribution from the trust. 
E) None of these. 
A) $90,000 
B) $76,000 
C) $64,000 
D) zero - there is no completed gift until the trustee makes a distribution from the trust. 
E) None of these.

Question 8

A unified credit is subtracted in calculating both the gift tax and the estate tax. Why doesn't this calculation have the effect of increasing the total unified credit amount?

Accepted Answer

A) The tentative estate tax is reduced by only taxes payable on adjusted taxable gifts rather than gross gift taxes. 
B) The unified credit only offsets the exemption equivalent. 
C) The unified credit cannot be used to offset gift taxes on adjusted taxable gifts. 
D) The unified credit varies in amount from year to year. 
E) None of these. 
A) The tentative estate tax is reduced by only taxes payable on adjusted taxable gifts rather than gross gift taxes. 
B) The unified credit only offsets the exemption equivalent. 
C) The unified credit cannot be used to offset gift taxes on adjusted taxable gifts. 
D) The unified credit varies in amount from year to year. 
E) None of these.

Question 9

Ashley owns a whole-life insurance policy worth $25,000 that directs the insurance company to pay the beneficiary $500,000 on her death. Ashley pays the annual policy premiums and has the power to designate the beneficiary of the policy. What value of the policy, if any, would be included in Ashley's estate upon her death?

Accepted Answer

$500,000
Explanation: Because Ashley own

Question 10

A transfer of cash to a bank account held in joint tenancy with the right of survivorship is not a completed gift.

Accepted Answer

A) True 
 B)False

Question 11

The annual exclusion eliminates relatively small transfers of present interests in property.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is a true statement?

Accepted Answer

A) A remainder interest held by the decedent at the time of death is not included in the decedent's gross estate. 
B) The value of a remainder interest depends in part on the Section 7520 interest rate at the time of death. 
C) The value of a remainder interest in a life estate is independent of the age of the life tenant. 
D) The value of a life estate does not depend upon the age of the life tenant. 
E) None of these is true. 
A) A remainder interest held by the decedent at the time of death is not included in the decedent's gross estate. 
B) The value of a remainder interest depends in part on the Section 7520 interest rate at the time of death. 
C) The value of a remainder interest in a life estate is independent of the age of the life tenant. 
D) The value of a life estate does not depend upon the age of the life tenant. 
E) None of these is true.

Question 13

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.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is a true statement?

Accepted Answer

A) A serial gift strategy utilizes intervivos gifts to multiple donees over multiple years to maximize the annual exclusion. 
B) A serial gift strategy works well even if the gifts don't qualify as present interests. 
C) A bypass trust avoids all estate taxes on the estate of the first spouse to die. 
D) The income tax savings from holding appreciated property until death is always outweighed by the additional estate tax imposed on the property. 
E) None of these is true. 
A) A serial gift strategy utilizes intervivos gifts to multiple donees over multiple years to maximize the annual exclusion. 
B) A serial gift strategy works well even if the gifts don't qualify as present interests. 
C) A bypass trust avoids all estate taxes on the estate of the first spouse to die. 
D) The income tax savings from holding appreciated property until death is always outweighed by the additional estate tax imposed on the property. 
E) None of these is true.

Question 15

Which of the following transactions would not utilize the "Section 7520 rate" to calculate the value of the transfer?

Accepted Answer

A) A transfer of property with a retained life estate. 
B) A transfer of property to a spouse. 
C) A transfer of a remainder interest in real property. 
D) A transfer of a 10-year term certain in real property. 
E) None of these utilizes the "Section 7520 rate" in the calculation of the value of the property. 
A) A transfer of property with a retained life estate. 
B) A transfer of property to a spouse. 
C) A transfer of a remainder interest in real property. 
D) A transfer of a 10-year term certain in real property. 
E) None of these utilizes the "Section 7520 rate" in the calculation of the value of the property.

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

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?

Accepted Answer

A) Trevor must have a taxable estate of at least $4 million. 
B) Trevor must have an adjusted gross estate of at least $4 million. 
C) Trevor must have an estate tax base (cumulative taxable transfers) of at least $4 million. 
D) Trevor must have a gross estate of at least $4 million. 
E) None of these is necessarily truE.Property included in the probate estate must be included in the gross estate but adjustments made in calculating the adjusted gross estate (both positive and negative) make other generalizations problematic. 
A) Trevor must have a taxable estate of at least $4 million. 
B) Trevor must have an adjusted gross estate of at least $4 million. 
C) Trevor must have an estate tax base (cumulative taxable transfers) of at least $4 million. 
D) Trevor must have a gross estate of at least $4 million. 
E) None of these is necessarily truE.Property included in the probate estate must be included in the gross estate but adjustments made in calculating the adjusted gross estate (both positive and negative) make other generalizations problematic.

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

The probate estate will include the total value of all real property owned by the decedent at the time of death regardless of whether the decedent co-owned the property as tenants in common or as joint tenants with the right of survivorship.

Accepted Answer

A) True 
 B)False

Question 20

This year Anthony transferred $250,000 of bonds to a trust with directions to the trustee to pay income to his son for the next 20 years. After 20 years the trust corpus would revert to Anthony. Which of the following is a true statement?

Accepted Answer

A) Anthony has made a $250,000 gift. 
B) Anthony has made a $237,000 taxable gift. 
C) Anthony has not yet made a completed gift. 
D) Anthony has made a completed gift of the income interest only. 
E) None of these is true. 
A) Anthony has made a $250,000 gift. 
B) Anthony has made a $237,000 taxable gift. 
C) Anthony has not yet made a completed gift. 
D) Anthony has made a completed gift of the income interest only. 
E) None of these is true.

Exam 25: Transfer Taxes and Wealth Planning

Which of the following transfers is a completed gift?

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

Christopher's residence was damaged by a storm during the administration of his estate. Christopher's executor paid $120,000 to repair the residence after the storm. Which of the following is a true statement?

Including adjusted taxable gifts in the taxable estate causes these gifts to be taxed twice, once under the gift tax and again under the estate tax.

Natalie transferred $500,000 of bonds to a revocable trust with directions to the trustee to pay income to her aunt for five years after which the corpus is to be distributed to Natalie's niece. At year end, the trustee paid $15,000 of income to the aunt. Which of the following is a true statement?

A unified credit is subtracted in calculating both the gift tax and the estate tax. Why doesn't this calculation have the effect of increasing the total unified credit amount?

A transfer of cash to a bank account held in joint tenancy with the right of survivorship is not a completed gift.

The annual exclusion eliminates relatively small transfers of present interests in property.

Which of the following is a true statement?

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.

Which of the following is a true statement?

Which of the following transactions would not utilize the "Section 7520 rate" to calculate the value of the transfer?

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

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?

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

The probate estate will include the total value of all real property owned by the decedent at the time of death regardless of whether the decedent co-owned the property as tenants in common or as joint tenants with the right of survivorship.

This year Anthony transferred $250,000 of bonds to a trust with directions to the trustee to pay income to his son for the next 20 years. After 20 years the trust corpus would revert to Anthony. Which of the following is a true statement?

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

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