Question 1

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. C

Question 2

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 value of property owned outright ($3.1 million) and the proportion of real property represented by the value as the amount of the purchase price she initially provided. Sophia provided 20 percent ($200,000 of $1 million) of the total cost, so her estate would include $900,000 of the real property. Thus, Sophia's gross estate would be $4 million ($3.1 million plus $900,000).

Question 3

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

Accepted Answer

A) True 
 B)False  True

Question 4

A trust is a legal entity that can only exist for a year.

Accepted Answer

A) True 
 B)False

Question 5

The theft of property included in the gross estate is only deductible in calculating the taxable estate if the loss exceeds 10 percent of the decedent's adjusted gross estate.

Accepted Answer

A) True 
 B)False

Question 6

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 among 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.

Question 7

The gross estate includes the value of half of real property owned by a decedent and spouse in joint tenancy with the right of survivorship.

Accepted Answer

A) True 
 B)False

Question 8

Adjusted taxable gifts are included when calculating the taxable estate but are not subject to double taxation because a tax credit is provided for taxes payable on adjusted taxable gifts.

Accepted Answer

A) True 
 B)False

Question 9

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 the choices are necessarily true.

Question 10

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.

Question 11

Which of the following is a true statement?

Accepted Answer

A)   A serial gift strategy utilizes inter vivos 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 are always outweighed by the additional estate tax imposed on the property.
E)   None of the choices are true.

Question 12

No deductions are allowed when calculating the taxable estate.

Accepted Answer

A) True 
 B)False

Question 13

Adjusted taxable gifts are added to the taxable estate to accomplish which of the following objectives?

Accepted Answer

A)   Prevent double taxation of previously taxed gifts.
B)   Increase the marginal tax rate on previously taxed gifts.
C)   Increase the marginal tax rate on the taxable estate.
D)   Remove inter vivos transfers from cumulative taxable transfers.
E)   None of the choices are correct.

Question 14

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.

Question 15

At his death Stanley owned real estate worth $393,240 with two other individuals as equal tenants in common. Stanley contributed $58,000 to the $116,000 total cost of the property. What amount, if any, is included in Stanley's gross estate?

Accepted Answer

A)   $58,000.
B)   $196,620.
C)   $393,240.
D)   $131,080.
E)   None of the choices are correct.

Question 16

This year Samantha gave each of her three nephews birthday gifts of $10,000 in cash. At Christmas, Samantha gave each of her three nephews Christmas gifts of an additional $6,000 in cash. What is the amount of the taxable gifts, if any, made by Samantha this year?

Accepted Answer

A)   $3,000.
B)   $33,000.
C)   $48,000.
D)   zero-none of the gifts exceed the annual exclusion.
E)   None of the choices are correct.

Question 17

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.

Question 18

Angel and Abigail are married and live in a common-law state. Angel and Abigail own a parcel of realty as joint tenants with the right of survivorship. In addition, Abigail owns another parcel of realty in her name alone. If Abigail should die when the jointly owned realty is worth $2.5 million and her own parcel of realty is worth $3.95 million, what is the total value of realty that would be included in Abigail's gross estate?

Accepted Answer

The answer of Angel and Abigail are married and live...

Question 19

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 20

Which of the following is a complete 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 complete taxable gift.

Exam 14: Transfer Taxes and Wealth Planning

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?

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

A trust is a legal entity that can only exist for a year.

The theft of property included in the gross estate is only deductible in calculating the taxable estate if the loss exceeds 10 percent of the decedent's adjusted gross estate.

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 among them. What is the amount of the taxable gifts, if any, made by Christian?

The gross estate includes the value of half of real property owned by a decedent and spouse in joint tenancy with the right of survivorship.

Adjusted taxable gifts are included when calculating the taxable estate but are not subject to double taxation because a tax credit is provided for taxes payable on adjusted taxable gifts.

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?

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

Which of the following is a true statement?

No deductions are allowed when calculating the taxable estate.

Adjusted taxable gifts are added to the taxable estate to accomplish which of the following objectives?

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

At his death Stanley owned real estate worth $393,240 with two other individuals as equal tenants in common. Stanley contributed $58,000 to the $116,000 total cost of the property. What amount, if any, is included in Stanley's gross estate?

This year Samantha gave each of her three nephews birthday gifts of $10,000 in cash. At Christmas, Samantha gave each of her three nephews Christmas gifts of an additional $6,000 in cash. What is the amount of the taxable gifts, if any, made by Samantha this year?

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

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.

Which of the following is a complete taxable gift?