Question 1

What is the justification for the terminable interest rule that is applicable to the marital deduction? Give an example.

Accepted Answer

The answer of What is the justification for the terminable...

Question 2

On the date of her death, Ava owned the following.
∙ An insurance policy face amount of $500,000) on the life of Benjamin Ava's current husband)
with herself as the designated beneficiary. The policy has a cash surrender value of $50,000.
∙ A life estate in a trust created by Alexander Ava's deceased prior husband). The trust current value of $2,900,000) was worth $1,000,000 when created 10 years ago. A QTIP election was made by the executor of Alexander's estate.
∙ Federal income tax refund of $80,000 on a prior year's tax return and paid to the executor of
Ava's estate.
As to these items, how much is included in Ava's gross estate?

Accepted Answer

The answer of On the date of her death, Ava...

Question 3

Classify each of the following statements.
-Clarence pays the medical providers
eg., physicians, hospital) for his aunt's knee replacement operation. The aunt does not qualify as Clarence's dependent.

Accepted Answer

A) No taxable transfer occurs. 
B) Gift tax applies. 
C) Estate tax applies.

Question 4

At the time of her death on June 6, Mary owned the following assets.
∙ Taupe Corporation stock cost $400,000, FMV $800,000). On May 4, Taupe declared a cash dividend, payable on June 15, to shareholders as of the record date of June 4. Mary's executor received the $40,000 dividend on the scheduled payment date.
∙ City of Boise bonds cost $800,000, FMV $780,000). Interest accrued to June 6 was $42,000.
The executor eventually collected $50,000 included postdeath accrual of $8,000) on July 20.
As to these transactions, how much is included in Mary's gross estate?

Accepted Answer

The answer of At the time of her death on...

Question 5

Classify each of the following statements:
-Under her father's will, Faith is to receive 10,000 shares of GE common stock. Eight months after her father's death, Faith disclaims the 10,000 shares.

Accepted Answer

A) No taxable transfer occurs. 
B) Gift tax applies. 
C) Estate tax applies.

Question 6

Classify each statement appropriately.
-Casualty loss to property after the death of the owner.

Accepted Answer

A) Deductible from the gross estate in arriving at the taxable estate. 
B) Not deductible from the gross estate in arriving at the taxable estate.

Question 7

The Federal transfer tax system includes three separate taxes.

Accepted Answer

A) True 
 B)False

Question 8

Classify each of the following statements.
-Using his own funds, Horace establishes a savings account designating ownership as follows: "Horace and Nadine as joint tenants with right of survivorship." Nadine predeceases Horace.

Accepted Answer

A) No taxable transfer occurs. 
B) Gift tax applies. 
C) Estate tax applies.

Question 9

In which of the following independent situations has Jean made a gift?

Accepted Answer

A)  She gives her 19-year old son $20,000 to use for his college expenses. 
B)  She buys her nondependent grandfather a new $120,000 RV for his birthday. 
C)  She sends $44,000 to Collins University to cover her nephew's tuition. The nephew does not qualify as Jean's dependent. 
D)  She contributes $10,000 to her U.S. Senator's reelection campaign.

Question 10

Classify each of the following independent statements:.
-Cash dividends on stock owned by the decedent declaration and record dates preceded death but payment date was after death).

Accepted Answer

A) Some or all of the asset is included in the decedent's gross estate. 
B) None of the asset is included in the decedent's gross estate.

Question 11

Classify each of the following independent statements:.
-Decedent owned a policy on the life of his spouse with himself as the designated beneficiary. The spouse survives.

Accepted Answer

A) Some or all of the asset is included in the decedent's gross estate. 
B) None of the asset is included in the decedent's gross estate.

Question 12

Murray owns an insurance policy on the life of his father, Logan. Upon Logan's death, the policy proceeds of
$2,000,000 are paid to the designated beneficiary, Grace. What are the transfer tax consequences resulting from
Logan's death based on the following independent assumptions?
a. Grace is Murray's daughter.
b. Grace is Murray's wife.
c. What are the tax consequences if Murray dies before both Grace and Logan)?

Accepted Answer

The answer of Murray owns an insurance policy on the...

Question 13

Classify each statement appropriately.
-Selling expenses incurred to sell estate assets in order to pay administration expenses.

Accepted Answer

A) Deductible from the gross estate in arriving at the taxable estate. 
B) Not deductible from the gross estate in arriving at the taxable estate.

Question 14

At the time of his death, Tom owned some common stock. $$\begin{array} { l l } 
&\begin{array} { l } 
\text { Date of Death } \
\text { Value }
\end{array} & \begin{array} { l } 
\text { Value Six } \
\text { Months Later }
\end{array} \
\text { Citron Corporation }&\$ 1,500,000 & \$ 1,100,000 \
\text { Grey Corporation }&1,300,000 & 1,400,000
\end{array}$$ If the alternate valuation date is properly elected, the value of Tom's estate as to these stocks is:

Accepted Answer

A)  $2,300,000. 
B)  $2,400,000. 
C)  $2,500,000. 
D)  $2,700,000.

Question 15

Match each statement with the correct choice. Some choices may be used more than once or not at all.
-Inheritance tax

Accepted Answer

A) In the current year, Debby, a widow, dies. Two years ago she inherited a large amount of wealth from her brother. 
B) Death does not defeat an owner's interest in property. 
C) Exists only if husband and wife are involved. 
D) A type of state tax on transfers by death. 
E) Must decrease the amount of the gross estate.
F)Annual exclusion not allowed.
G)Cumulative in effect.
H)Right of survivorship present as to type of ownership.
I)Overrides the terminable interest rule of the marital deduction.
J)Exemption equivalent.
K)Bypass amount.
L)No correct match provided.

Question 16

Concerning the Federal tax on generation-skipping transfers:

Accepted Answer

A)  The tax applies in addition to any applicable gift or estate tax. 
B)  The tax applies in lieu of any applicable gift or estate tax. 
C)  The tax is applied at a flat 33 percent tax rate. 
D)  The annual gift tax exclusion cannot be used to reduce the tax.

Question 17

The Federal transfer taxes generally apply a flat rate of:

Accepted Answer

A)  10%. 
B)  40%. 
C)  65%. 
D)  The taxes apply three graduated rates, not a flat rate.

Question 18

At the time of Dylan's death, he was a resident of the United States. He owns land located in a foreign country, which is subject to that country's estate tax. This same land also can be subject to the Federal estate tax.

Accepted Answer

A) True 
 B)False

Question 19

At the time of his death, Jason was a participant in Silver Corporation's qualified pension plan and group term life insurance. The balance of the survivorship feature in his pension plan is that: $\begin{array}{ll}
\text { Contributions by Silver } & \$ 800,000 \
\text { After-tax contributions by Jason } & 400,000 \
\text { Plan earnings } & 300,000
\end{array}$ The term insurance has a maturity value of $100,000. All amounts are paid to Pam, Jason's daughter. One result of these transactions is:

Accepted Answer

A)  Pam must pay income tax on $300,000. 
B)  Pam must pay income tax on $1,100,000. 
C)  Jason's gross estate must include $1,200,000. 
D)  Jason's gross estate must include $1,500,000.

Question 20

Concerning the Federal tax on generation-skipping transfers:

Accepted Answer

A)  The charitable deduction is allowed to reduce the tax. 
B)  The marital deduction is allowed to reduce the tax. 
C)  A credit is allowed for any state-level GST tax paid. 
D)  All of these statements are true.

Exam 18: The Federal Gift and Estate Taxes

What is the justification for the terminable interest rule that is applicable to the marital deduction? Give an example.

Classify each of the following statements. -Clarence pays the medical providers eg., physicians, hospital) for his aunt's knee replacement operation. The aunt does not qualify as Clarence's dependent.

Classify each of the following statements: -Under her father's will, Faith is to receive 10,000 shares of GE common stock. Eight months after her father's death, Faith disclaims the 10,000 shares.

Classify each statement appropriately. -Casualty loss to property after the death of the owner.

The Federal transfer tax system includes three separate taxes.

Classify each of the following statements. -Using his own funds, Horace establishes a savings account designating ownership as follows: "Horace and Nadine as joint tenants with right of survivorship." Nadine predeceases Horace.

In which of the following independent situations has Jean made a gift?

Classify each of the following independent statements:. -Cash dividends on stock owned by the decedent declaration and record dates preceded death but payment date was after death) .

Classify each of the following independent statements:. -Decedent owned a policy on the life of his spouse with himself as the designated beneficiary. The spouse survives.

Classify each statement appropriately. -Selling expenses incurred to sell estate assets in order to pay administration expenses.

Match each statement with the correct choice. Some choices may be used more than once or not at all. -Inheritance tax

Concerning the Federal tax on generation-skipping transfers:

The Federal transfer taxes generally apply a flat rate of:

At the time of Dylan's death, he was a resident of the United States. He owns land located in a foreign country, which is subject to that country's estate tax. This same land also can be subject to the Federal estate tax.

Concerning the Federal tax on generation-skipping transfers: