Question 1

A withdrawal of money from a bank account held in joint tenancy with the right of survivorship may constitute a completed gift.

Accepted Answer

A) True 
 B)False

Question 2

No deductions are allowed when calculating the taxable estate.

Accepted Answer

A) True 
 B)False

Question 3

Isaac is married and Isaac and his spouse agree that they want to transfer the maximum amount of cash to each of their four children and six grandchildren. How much cash in total can Isaac and his spouse transfer to his children and grandchildren each year without creating any taxable gifts?

Accepted Answer

$300,000
Isaac and his spouse can gift a

Question 4

Property inherited from a decedent has an adjusted basis equal to the value of the property included in the decedent's estate.

Accepted Answer

A) True 
 B)False

Question 5

Matthew and Addison are married and live in Michigan, a common-law state. For the holidays Addison gave cash gifts of $40,000 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)  $45,000 
B)  $18,000. 
C)  $15,000. 
D)  $10,000. 
E)  None of the choices are correct. 
A)  $45,000 
B)  $18,000. 
C)  $15,000. 
D)  $10,000. 
E)  None of the choices are correct.

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

At her death Emily owned real estate worth $2.5 million and other property worth $10 million. Property taxes of $200,000 were accrued on the real estate at the time of Emily's death. Which of the following is a true statement with respect to these items without considering any other owned property?

Accepted Answer

A)  Emily's gross estate is $12.3 million. 
B)  Emily's taxable estate is $12.5 million. 
C)  Emily's adjusted gross estate is $12.3 million. 
D)  Emily's estate tax base is $12.5 million. 
E)  None of the choices are true. 
A)  Emily's gross estate is $12.3 million. 
B)  Emily's taxable estate is $12.5 million. 
C)  Emily's adjusted gross estate is $12.3 million. 
D)  Emily's estate tax base is $12.5 million. 
E)  None of the choices are true.

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
Because Ashley owned

Question 10

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

Accepted Answer

A)  An applicable credit and a marital deduction. 
B)  A charitable deduction and an annual exclusion. 
C)  A gift-splitting election and a deduction for income taxes paid by the fiduciary. 
D)  A charitable deduction and the unused spousal exemption equivalent. 
E)  All of these choices are characteristics common to both the gift and the estate tax. 
A)  An applicable credit and a marital deduction. 
B)  A charitable deduction and an annual exclusion. 
C)  A gift-splitting election and a deduction for income taxes paid by the fiduciary. 
D)  A charitable deduction and the unused spousal exemption equivalent. 
E)  All of these choices are characteristics common to both the gift and the estate tax.

Question 11

The generation-skipping tax is designed to accomplish which of the following?

Accepted Answer

A)  Generate additional revenues to supplement the estate tax. 
B)  Prevent the avoidance of transfer taxes (both estate and gift tax) through transfers that skip a generation of recipients. 
C)  Eliminate the possibility that the estate tax can be avoided by gifts in contemplation of death. 
D)  Replace the gift tax on distributions from trusts. 
E)  None of the choices are correct. 
A)  Generate additional revenues to supplement the estate tax. 
B)  Prevent the avoidance of transfer taxes (both estate and gift tax) through transfers that skip a generation of recipients. 
C)  Eliminate the possibility that the estate tax can be avoided by gifts in contemplation of death. 
D)  Replace the gift tax on distributions from trusts. 
E)  None of the choices are correct.

Question 12

Sophia is single and owns the following property:
   Sophia owns the real property in joint tenancy with Daniel. They purchased the property several years ago for $1 million. Sophia was only able to provide $200,000 of the purchase price. If Sophia dies, what is the amount of her gross estate?

Accepted Answer

$4 million
Sophia's estate includes the

Question 13

A terminable interest in property is any interest that terminates during the current year.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

Joshua and David purchased real property for $500,000 as equal tenants in common. Although they are listed as equal co-owners, Joshua was only able to provide $200,000 of the purchase price. David treated the additional $100,000 of his contribution to the purchase price as a gift to Joshua. If the property is worth $2.5 million at Joshua's death, what amount would be included in Joshua's estate?

Accepted Answer

$1.25 million
If the title to

Question 16

Which of the following is a completed taxable gift?

Accepted Answer

A)  $20,000 in cash contributed to the committee to reelect Senator BlowHard. 
B)  $15,000 in cash given directly to Valley Hospital for the care of a neighbor who was in an auto accident. 
C)  $18,000 in cash given directly to a needy student to pay for college tuition. 
D)  $55,000 in cash transferred to a former spouse under a written property settlement shortly after a divorce. 
E)  None of the choices is a completed taxable gift. 
A)  $20,000 in cash contributed to the committee to reelect Senator BlowHard. 
B)  $15,000 in cash given directly to Valley Hospital for the care of a neighbor who was in an auto accident. 
C)  $18,000 in cash given directly to a needy student to pay for college tuition. 
D)  $55,000 in cash transferred to a former spouse under a written property settlement shortly after a divorce. 
E)  None of the choices is a completed taxable gift.

Question 17

At his death Stanley owned real estate worth $345,000 with two other individuals as equal tenants in common. Stanley contributed $50,000 to the $100,000 total cost of the property. What amount, if any, is included in Stanley's gross estate?

Accepted Answer

A)  $50,000. 
B)  $172,500. 
C)  $345,000. 
D)  $115,000. 
E)  None of the choices are correct. 
A)  $50,000. 
B)  $172,500. 
C)  $345,000. 
D)  $115,000. 
E)  None of the choices are correct.

Question 18

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 choices 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 choices utilizes the "Section 7520 rate" in the calculation of the value of the property.

Question 19

Tracey is unmarried and owns $17 million in stock and bonds. What is the result if Tracey dies this year and leaves all of her property to a qualified charity?

Accepted Answer

A)  Tracey's gross estate will be zero. 
B)  Tracey's estate tax basis will be zero. 
C)  Tracey's taxable estate will be zero. 
D)  Tracey's estate will have a tentative estate tax of zero. 
E)  None of the choices are correct. 
A)  Tracey's gross estate will be zero. 
B)  Tracey's estate tax basis will be zero. 
C)  Tracey's taxable estate will be zero. 
D)  Tracey's estate will have a tentative estate tax of zero. 
E)  None of the choices are correct.

Question 20

Proceeds of life insurance paid to the decedent's estate due to the death of the decedent are included in the decedent's gross estate even if the decedent had no ownership rights in the policy at the time of death.

Accepted Answer

A) True 
 B)False

Exam 25: Transfer Taxes and Wealth Planning

A withdrawal of money from a bank account held in joint tenancy with the right of survivorship may constitute a completed gift.

No deductions are allowed when calculating the taxable estate.

Isaac is married and Isaac and his spouse agree that they want to transfer the maximum amount of cash to each of their four children and six grandchildren. How much cash in total can Isaac and his spouse transfer to his children and grandchildren each year without creating any taxable gifts?

Property inherited from a decedent has an adjusted basis equal to the value of the property included in the decedent's estate.

Matthew and Addison are married and live in Michigan, a common-law state. For the holidays Addison gave cash gifts of $40,000 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 marital and charitable deductions are common to both the estate tax and the gift tax formulas.

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

At her death Emily owned real estate worth $2.5 million and other property worth $10 million. Property taxes of $200,000 were accrued on the real estate at the time of Emily's death. Which of the following is a true statement with respect to these items without considering any other owned property?

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

The generation-skipping tax is designed to accomplish which of the following?

Sophia is single and owns the following property: Sophia owns the real property in joint tenancy with Daniel. They purchased the property several years ago for $1 million. Sophia was only able to provide $200,000 of the purchase price. If Sophia dies, what is the amount of her gross estate?

A terminable interest in property is any interest that terminates during the current year.

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

Which of the following is a completed taxable gift?

At his death Stanley owned real estate worth $345,000 with two other individuals as equal tenants in common. Stanley contributed $50,000 to the $100,000 total cost of the property. What amount, if any, is included in Stanley's gross estate?

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

Tracey is unmarried and owns $17 million in stock and bonds. What is the result if Tracey dies this year and leaves all of her property to a qualified charity?

Proceeds of life insurance paid to the decedent's estate due to the death of the decedent are included in the decedent's gross estate even if the decedent had no ownership rights in the policy at the time of death.

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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