Question 1

Steve gave stock with an adjusted basis of $7,000 and an FMV of $10,000 to Alice. No gift tax was paid. Later, Alice sold the stock for $12,000. The gain Alice will recognize on the sale is

Accepted Answer

A) $5,000. 
B) $2,000. 
C) $0. 
D) none of the above

Question 2

Which of the following is a completed gift?

Accepted Answer

A) Greta transfers $50,000 to a revocable trust benefiting her children Hans and Julio. 
B) Juan purchases a ski chalet using his own funds, but listing Penelope as a joint owner. 
C) Horatio transfers $60,000 to a bank account with Hazel. Hazel does not contribute any money to the account. 
D) Mike changes the beneficiary of his policy to Meredith.

Question 3

In 2020, Letty makes taxable gifts totaling $4 million. Her only other taxable gifts amount to $1 million, all of which were made in 2018. What is Letty's 2020 gift tax liability before the unified credit?

Accepted Answer

A) $2,220,800 
B) $1,875,000 
C) $1,840,800 
D) $1,600,000

Question 4

Bryce pays $40,000 for his adult grandson's tuition at medical school and $18,000 for the grandson's room and board in the medical school's dormitory. All payments are made directly to the medical school. Do these payments by Bryce qualify as gifts?

Accepted Answer

The answer of Bryce pays $40,000 for his adult grandson's...

Question 5

Virginia gave stock with an adjusted basis of $8,000 and an FMV of $10,000 to Carmen. No gift tax was paid on the transfer. Carmen then sold the stock for $9,000. The gain or loss Carmen will recognize on the sale is

Accepted Answer

A) $2,000 gain. 
B) $1,000 gain. 
C) $1,000 loss. 
D) none of the above

Question 6

Calvin transfers land to a trust. Calvin retains the right to the income from the land for the rest of his life. Upon his death, the land is to be transferred to his daughter, Melissa. Calvin's interest is

Accepted Answer

A) a remainder interest. 
B) a life estate. 
C) a reversionary interest. 
D) a term certain.

Question 7

In the current year, Donna gives $50,000 cash and $30,000 of stock to Mike. She also gives $40,000 of tax-exempt bonds to Angela. Her husband, Andy, gives $200,000 of land to Angela. Assume the couple elects gift splitting for the current year. Donna's taxable gifts total

Accepted Answer

A) $130,000. 
B) $148,000. 
C) $110,000. 
D) $60,000.

Question 8

Elaine loaned her brother, Mike, $175,000 to purchase a new home. Elaine does not charge Mike any interest on the loan. What are the tax consequences to Elaine and Mike?

Accepted Answer

A) Elaine is treated as having made a gift of the forgone interest on the $175,000 loan to Mike. 
B) Elaine only has to impute interest on $75,000 of the loan to Mike. 
C) If Mike has no net investment income, Elaine does not have to treat the forgone interest as a gift. 
D) Mike can deduct the interest that he is deemed to have paid Elaine.

Question 9

A husband transfers $90,000 by gift directly to his wife. The marital deduction for the transfer is

Accepted Answer

A) $0 unless he elects to claim one. 
B) $90,000. 
C) $75,000. 
D) none of the above.

Question 10

Donna transfers $200,000 of property to an irrevocable trust with a bank as trustee. Donna names Toby (age 60)to receive all of the trust income for the rest of his life. At Toby's death, the property is to pass to Al or Al's estate. What kind of interest do Toby and Al possess?

Accepted Answer

The answer of Donna transfers $200,000 of property to an...

Question 11

In the current year, Melanie makes two transfers to Peter, her husband. In June, she gives him land valued at $50,000. In December, she transfers $500,000 to a trust with a bank named as trustee. All income must be paid to Peter monthly for life. At Peter's death, the property passes to their children. Compute the maximum marital deduction assuming Melanie makes the appropriate elections.

Accepted Answer

A) $550,000 
B) $535,000 
C) $500,000 
D) $50,000

Question 12

Identify which of the following statements is false.

Accepted Answer

A) The marital deduction for gift tax purposes is limited to one-half the value of the property transferred. 
B) The marital deduction is generally allowed since the transfer remains within the economic (husband/wife)unit. 
C) The marital deduction for gift tax purposes is limited to the amount of the includible gift (e.g., the amount of the gift that is in excess of the annual exclusion). 
D) Transfers of community property are eligible for the marital exclusion.

Question 13

What is the due date for the gift tax return? Are there any exceptions? If so, what are they?

Accepted Answer

The answer of What is the due date for the...

Question 14

Identify which of the following statements is false.

Accepted Answer

A) A gift occurs when a revocable trust is funded. 
B) A gift does not occur until the transfer is complete. 
C) A transfer is incomplete (and not subject to the gift tax)if the donor retains the power to name new beneficiaries or to change the interests of the beneficiaries. 
D) Transfers to an irrevocable trust can be deemed incomplete.

Question 15

Abby transfers $10,000 to a political organization to promote her favorite candidate for president. Does Abby's transfer qualify as a gift?

Accepted Answer

The answer of Abby transfers $10,000 to a political organization...

Question 16

Roger makes a $1,000,000 cash gift on January 1 of the current year, and dies on February 1 of the current year. Roger's gift tax return is due

Accepted Answer

A) April 15 of the current year. 
B) December 31 of the current year. 
C) April 15 of the next year. 
D) nine months after his date of death.

Question 17

Marilyn and Earl establish a trust benefiting their grandchild, Courtney, age 4. Courtney is to receive the accumulated income and corpus when she reaches age 30. In the year of the transfer, Courtney has a two-week period in which to request distributions. This trust is a

Accepted Answer

A) 2503(c)trust. 
B) Clifford trust. 
C) Crummey trust. 
D) none of the above.

Question 18

Ida sells some stock to Mae for $20,000 at a time when the stock is valued at $50,000. Later in the year, she gives Mae $16,000 in cash.
a)What is the amount of Ida's taxable gifts?
b)How would your answer to Part (a)change if Ida gave the cash to Jonathan instead of to Mae?

Accepted Answer

The answer of Ida sells some stock to Mae for...

Question 19

Discuss the ways in which the estate and gift tax system is a unified system.

Accepted Answer

The answer of Discuss the ways in which the estate...

Question 20

On March 1, Bruce transfers $300,000 to a revocable trust with Sprint Bank as trustee. The trustee must pay out all the income to Sam during Sam's lifetime. At Sam's death, the property is to be paid to Sam Jr. On December 31, the trustee distributes $40,000 of income to Sam. What date did a gift occur? What was the amount of the gift?

Accepted Answer

The answer of On March 1, Bruce transfers $300,000 to...

Exam 12: The Gift Tax

Steve gave stock with an adjusted basis of $7,000 and an FMV of $10,000 to Alice. No gift tax was paid. Later, Alice sold the stock for $12,000. The gain Alice will recognize on the sale is

Which of the following is a completed gift?

In 2020, Letty makes taxable gifts totaling $4 million. Her only other taxable gifts amount to $1 million, all of which were made in 2018. What is Letty's 2020 gift tax liability before the unified credit?

Bryce pays $40,000 for his adult grandson's tuition at medical school and $18,000 for the grandson's room and board in the medical school's dormitory. All payments are made directly to the medical school. Do these payments by Bryce qualify as gifts?

Virginia gave stock with an adjusted basis of $8,000 and an FMV of $10,000 to Carmen. No gift tax was paid on the transfer. Carmen then sold the stock for $9,000. The gain or loss Carmen will recognize on the sale is

Calvin transfers land to a trust. Calvin retains the right to the income from the land for the rest of his life. Upon his death, the land is to be transferred to his daughter, Melissa. Calvin's interest is

In the current year, Donna gives $50,000 cash and $30,000 of stock to Mike. She also gives $40,000 of tax-exempt bonds to Angela. Her husband, Andy, gives $200,000 of land to Angela. Assume the couple elects gift splitting for the current year. Donna's taxable gifts total

Elaine loaned her brother, Mike, $175,000 to purchase a new home. Elaine does not charge Mike any interest on the loan. What are the tax consequences to Elaine and Mike?

A husband transfers $90,000 by gift directly to his wife. The marital deduction for the transfer is

Donna transfers $200,000 of property to an irrevocable trust with a bank as trustee. Donna names Toby (age 60)to receive all of the trust income for the rest of his life. At Toby's death, the property is to pass to Al or Al's estate. What kind of interest do Toby and Al possess?

Identify which of the following statements is false.

What is the due date for the gift tax return? Are there any exceptions? If so, what are they?

Identify which of the following statements is false.

Abby transfers $10,000 to a political organization to promote her favorite candidate for president. Does Abby's transfer qualify as a gift?

Roger makes a $1,000,000 cash gift on January 1 of the current year, and dies on February 1 of the current year. Roger's gift tax return is due

Marilyn and Earl establish a trust benefiting their grandchild, Courtney, age 4. Courtney is to receive the accumulated income and corpus when she reaches age 30. In the year of the transfer, Courtney has a two-week period in which to request distributions. This trust is a

Ida sells some stock to Mae for $20,000 at a time when the stock is valued at $50,000. Later in the year, she gives Mae $16,000 in cash. a)What is the amount of Ida's taxable gifts? b)How would your answer to Part (a)change if Ida gave the cash to Jonathan instead of to Mae?

Discuss the ways in which the estate and gift tax system is a unified system.