Question 1

At his death Tyrone's life insurance policy paid his estate $85,000. What amount, if any, is included in Tyrone's gross estate?

Accepted Answer

A)  $85,000. 
B)  $85,000 if Tyrone had an incident of ownership of the policy at the time of his death. 
C)  zero if Tyrone did not transfer any ownership of the policy within three years of his date of death. 
D)  zero - life insurance proceeds due to the death of the decedent are not included in the gross estate. 
E)  zero if Tyrone's estate uses the insurance proceeds to pay Tyrone's estate tax. 
A)  $85,000. 
B)  $85,000 if Tyrone had an incident of ownership of the policy at the time of his death. 
C)  zero if Tyrone did not transfer any ownership of the policy within three years of his date of death. 
D)  zero - life insurance proceeds due to the death of the decedent are not included in the gross estate. 
E)  zero if Tyrone's estate uses the insurance proceeds to pay Tyrone's estate tax.

Question 2

The gift-splitting election only applies to gifts made by taxpayers who reside in community property states.

Accepted Answer

A) True 
 B)False

Question 3

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?

Accepted Answer

$150,000 and $115,000
The life estate is

Question 4

When creating an estate tax planning strategy, the income tax benefit derived from a step-up in tax basis on assets should be measured against the estate tax cost of including the assets in the decedent's gross estate.

Accepted Answer

A) True 
 B)False

Question 5

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 6

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

Accepted Answer

A) True 
 B)False

Question 7

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?

Accepted Answer

A)  $60,000. 
B)  $46,000. 
C)  $34,000. 
D)  $18,000. 
E)  None of the choices are correct - the amount of the taxable gifts cannot be ascertained without valuing each income interest. 
A)  $60,000. 
B)  $46,000. 
C)  $34,000. 
D)  $18,000. 
E)  None of the choices are correct - the amount of the taxable gifts cannot be ascertained without valuing each income interest.

Question 8

This year, Brent by himself purchased season baseball tickets in the exclusive sky club. The price of the tickets was $60,000, and Brent divided the tickets equally with his two brothers (Brent gave one-third of the tickets to each brother). Has Brent made a taxable gift and, if so, in what amount?

Accepted Answer

A)  Brent made a taxable gift of $45,000. 
B)  Brent made two taxable gifts of $17,000 each. 
C)  Brent transferred the tickets for love and affection so no gift tax is imposed. 
D)  Brent made two taxable gifts of $5,000. 
E)  None of the choices are correct. 
A)  Brent made a taxable gift of $45,000. 
B)  Brent made two taxable gifts of $17,000 each. 
C)  Brent transferred the tickets for love and affection so no gift tax is imposed. 
D)  Brent made two taxable gifts of $5,000. 
E)  None of the choices are correct.

Question 9

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 $34,000 to her niece. What is the amount of Andrew's taxable gifts?

Accepted Answer

A)  $2,000. 
B)  $10,000. 
C)  $25,000. 
D)  zero only if Andrew and Brianna elect to split gifts. 
E)  None of the choices are correct. 
A)  $2,000. 
B)  $10,000. 
C)  $25,000. 
D)  zero only if Andrew and Brianna elect to split gifts. 
E)  None of the choices are correct.

Question 10

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)  $75,000. 
C)  $64,000. 
D)  zero - there is no completed gift until the trustee makes a distribution from the trust. 
E)  None of the choices are correct. 
A)  $90,000. 
B)  $75,000. 
C)  $64,000. 
D)  zero - there is no completed gift until the trustee makes a distribution from the trust. 
E)  None of the choices are correct.

Question 11

A gift tax return does not need to be filed unless the taxpayer has made current gifts in excess of the applicable credit.

Accepted Answer

A) True 
 B)False

Question 12

A future interest is a right to receive income or property in the future.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is a true statement about the Federal gift tax return (Form 709)?

Accepted Answer

A)  Form 709 is due by the 15th day of the ninth month following the date of the gift. 
B)  Form 709 must be filed if a taxpayer wishes to elect gift splitting. 
C)  Form 709 need not be filed unless a taxpayer's taxable gifts exceed the exemption equivalent. 
D)  Form 709 is due nine months after the death of the decedent. 
E)  None of the choices are true. 
A)  Form 709 is due by the 15th day of the ninth month following the date of the gift. 
B)  Form 709 must be filed if a taxpayer wishes to elect gift splitting. 
C)  Form 709 need not be filed unless a taxpayer's taxable gifts exceed the exemption equivalent. 
D)  Form 709 is due nine months after the death of the decedent. 
E)  None of the choices are true.

Question 14

At his death Jose owned real estate worth $22 million but subject to a mortgage of $7 million. Which of the following is a true statement?

Accepted Answer

A)  $22 million is included in Jose's gross estate. 
B)  $15 million is included in Jose's gross estate. 
C)  The $7 million mortgage must be paid by Jose's estate. 
D)  The $7 million mortgage is not deductible if Jose's will transfers the property to a charity. 
E)  All of the choices are correct. 
A)  $22 million is included in Jose's gross estate. 
B)  $15 million is included in Jose's gross estate. 
C)  The $7 million mortgage must be paid by Jose's estate. 
D)  The $7 million mortgage is not deductible if Jose's will transfers the property to a charity. 
E)  All of the choices are correct.

Question 15

The exemption equivalent was repealed in 1976.

Accepted Answer

A) True 
 B)False

Question 16

A serial gift strategy consists of arranging a trust to maximize the value of the applicable credit.

Accepted Answer

A) True 
 B)False

Question 17

Chloe's gross estate consists of the following property valued at the date of death:   Chloe's real estate is encumbered by a mortgage of $450,000, and Chloe's executor paid her funeral costs of $6,000 and charged fees for $24,000. Which of the following is a true statement?

Accepted Answer

A)  Chloe's adjusted gross estate is at least $12,020,000. 
B)  Chloe's taxable estate is at least $12,020,000. 
C)  Chloe's taxable estate is $12,050,000. 
D)  Chloe's estate will calculate the tentative estate tax on $12.5 million. 
E)  None of the choices are true. 
A)  Chloe's adjusted gross estate is at least $12,020,000. 
B)  Chloe's taxable estate is at least $12,020,000. 
C)  Chloe's taxable estate is $12,050,000. 
D)  Chloe's estate will calculate the tentative estate tax on $12.5 million. 
E)  None of the choices are true.

Question 18

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 can deduct a loss of $120,000 on the estate tax return. 
D)  No casualty loss deduction is available for calculating the estate tax. 
E)  None of the choices are 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 can deduct a loss of $120,000 on the estate tax return. 
D)  No casualty loss deduction is available for calculating the estate tax. 
E)  None of the choices are true.

Question 19

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 applicable 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 the choices are 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 applicable 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 the choices are true.

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 25: Transfer Taxes and Wealth Planning

At his death Tyrone's life insurance policy paid his estate $85,000. What amount, if any, is included in Tyrone's gross estate?

The gift-splitting election only applies to gifts made by taxpayers who reside in community property states.

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?

When creating an estate tax planning strategy, the income tax benefit derived from a step-up in tax basis on assets should be measured against the estate tax cost of including the assets in the decedent's gross estate.

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

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

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?

This year, Brent by himself purchased season baseball tickets in the exclusive sky club. The price of the tickets was $60,000, and Brent divided the tickets equally with his two brothers (Brent gave one-third of the tickets to each brother). Has Brent made a taxable gift and, if so, in what amount?

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 $34,000 to her niece. What is the amount of Andrew's taxable gifts?

A gift tax return does not need to be filed unless the taxpayer has made current gifts in excess of the applicable credit.

A future interest is a right to receive income or property in the future.

Which of the following is a true statement about the Federal gift tax return (Form 709)?

At his death Jose owned real estate worth $22 million but subject to a mortgage of $7 million. Which of the following is a true statement?

The exemption equivalent was repealed in 1976.

A serial gift strategy consists of arranging a trust to maximize the value of the applicable credit.

Chloe's gross estate consists of the following property valued at the date of death: Chloe's real estate is encumbered by a mortgage of $450,000, and Chloe's executor paid her funeral costs of $6,000 and charged fees for $24,000. Which of the following is a true statement?

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?

Which of the following is a true statement?

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

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

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