Question 1

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 the choices are 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 the choices are true.

Question 2

This year Alex's friend, Kimberly, was disabled. Alex paid $30,000 to Kimberly's doctor for medical expenses. In addition, Alex also paid $25,000 to Kimberly directly 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 gi

Question 3

This year Nathan transferred $7 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 an applicable credit on an exemption equivalent of $5 million. What amount of gift tax, if any, must Nathan remit?

Accepted Answer

A)  $320,000. 
B)  $800,000. 
C)  $345,450. 
D)  zero - there is a $11.18 million exemption equivalent. 
E)  None of the choices are correct. The amount of tax cannot be estimated without the use of a tax rate schedule. 
A)  $320,000. 
B)  $800,000. 
C)  $345,450. 
D)  zero - there is a $11.18 million exemption equivalent. 
E)  None of the choices are correct. The amount of tax cannot be estimated without the use of a tax rate schedule.

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

The applicable credit is designed to allow a minimum amount of lifetime transfers without triggering the imposition of a transfer tax.

Accepted Answer

A) True 
 B)False

Question 7

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 8

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 9

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 10

Which of the following statements is (are) true?

Accepted Answer

A)  The same transfer tax rate schedule is used to calculate both the estate tax and the gift tax. 
B)  The transfer tax rate schedule is regressive in nature. 
C)  The amount of the applicable credit varies according to whether the taxable transfer is intervivos or testamentary. 
D)  The exemption equivalent automatically offsets transfers in calculating cumulative taxable transfers. 
E)  All of the choices are true. 
A)  The same transfer tax rate schedule is used to calculate both the estate tax and the gift tax. 
B)  The transfer tax rate schedule is regressive in nature. 
C)  The amount of the applicable credit varies according to whether the taxable transfer is intervivos or testamentary. 
D)  The exemption equivalent automatically offsets transfers in calculating cumulative taxable transfers. 
E)  All of the choices are true.

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

The probate estate consists of all property owned by the decedent that is excluded from the gross estate.

Accepted Answer

A) True 
 B)False

Question 13

The calculation of the value of a life estate in a trust generally does not depend upon which of the following factors?

Accepted Answer

A)  the age of the life tenant. 
B)  the Section 7520 interest rate. 
C)  the value of the property at the time of the transfer. 
D)  the manner in which the trust corpus is invested. 
E)  All of these factors are utilized in the calculation of the value of a life estate in a trust. 
A)  the age of the life tenant. 
B)  the Section 7520 interest rate. 
C)  the value of the property at the time of the transfer. 
D)  the manner in which the trust corpus is invested. 
E)  All of these factors are utilized in the calculation of the value of a life estate in a trust.

Question 14

Last year Diego transferred a life insurance policy worth $75,000 to an irrevocable trust with directions to distribute the corpus of the trust to his grandson, Juan, upon his graduation from college, or to Juan's estate upon his death. Diego paid $5,000 of gift tax on the transfer of the policy. Early this year, Diego died and the insurance company paid $600,000 to the trust. What amount, if any, is included in Diego's gross estate?

Accepted Answer

$605,000
Diego died within thr

Question 15

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 $236,000 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 the choices are true. 
A)  Anthony has made a $250,000 gift. 
B)  Anthony has made a $236,000 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 the choices are true.

Question 16

Eric has $5 million of property that he wants to leave to his four children. He is considering making a current gift of the property (rather than leaving the property to pass through his will). Eric has made many prior taxable gifts and additional taxable transfers will be subject to the highest transfer tax rate. Determine how much estate tax Eric will save if he gifts the property now and survives at least three years, during which time the property appreciates to $5.5 million? Ignore the time value of money in your calculation. (Use Exhibit 25-1)

Accepted Answer

$1,013,440
The top transfer tax rate is

Question 17

Caleb transferred $115,000 to an irrevocable trust for Avery. The trustee has the discretion to distribute income or corpus for Avery's benefit but is required to distribute all assets to Avery (or his estate) not later than Avery's 21st birthday. What is the amount, if any, of the taxable gift?

Accepted Answer

$100,000
Caleb will be entitled to an an

Question 18

This year Evelyn created an irrevocable trust to provide for Ed, her 32-year-old nephew, and Ed's family. Evelyn transferred $150,000 to the trust and named a bank as the trustee. The trust was directed to pay income to Ed until he reaches age 35 (three years from now), and at that time the trust is to be terminated and the corpus is to be distributed to Ed's two children (or their estates). Determine the amount, if any, of the taxable gift. The relevant interest rate is 6 percent.

Accepted Answer

$135,000
The $150,000 transfer to the tr

Question 19

The tax on cumulative taxable gifts is reduced by the applicable credit regardless of whether any applicable credit was used in prior years.

Accepted Answer

A) True 
 B)False

Question 20

A couple who is married at the time of completing a gift can elect to file a joint gift tax return.

Accepted Answer

A) True 
 B)False

Exam 25: Transfer Taxes and Wealth Planning

Which of the following is a true statement?

This year Alex's friend, Kimberly, was disabled. Alex paid $30,000 to Kimberly's doctor for medical expenses. In addition, Alex also paid $25,000 to Kimberly directly so that her son could afford tuition at State University this year. Has Alex made taxable gifts, and if so, in what amounts?

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

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

The applicable credit is designed to allow a minimum amount of lifetime transfers without triggering the imposition of a transfer tax.

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

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

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?

Which of the following statements is (are) true?

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

The probate estate consists of all property owned by the decedent that is excluded from the gross estate.

The calculation of the value of a life estate in a trust generally does not depend upon which of the following factors?

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?

Caleb transferred $115,000 to an irrevocable trust for Avery. The trustee has the discretion to distribute income or corpus for Avery's benefit but is required to distribute all assets to Avery (or his estate) not later than Avery's 21st birthday. What is the amount, if any, of the taxable gift?

The tax on cumulative taxable gifts is reduced by the applicable credit regardless of whether any applicable credit was used in prior years.

A couple who is married at the time of completing a gift can elect to file a joint gift tax return.

An Introduction to Tax

Tax Compliance, the IRS, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Dependents, 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

Caleb transferred $115,000 to an irrevocable trust for Avery. The trustee has the discretion to distribute income or corpus for Avery's benefit but is required to distribute all assets to Avery (or his estate) not later than Avery's 21^st birthday. What is the amount, if any, of the taxable gift?