Deck 18: The Federal Gift and Estate Taxes

Question 1

Some states impose inheritance taxes,but the Federal tax system does not.

Answer 1

True

Question 2

Sometimes also known as transaction taxes,Federal gift and estate taxes are excise taxes.

Answer 2

True

Question 3

For Federal estate tax purposes,the gross estate of a decedent may include property he or she does not own.

Answer 3

True

Question 4

A father wants to give a parcel of land to his two children.If he wants the survivor to have sole ownership,he should list ownership of the property as joint tenants.

Question 5

A Federal gift tax only can be imposed on the donor.

Question 6

Daniel's will provides that all of his property passes to a trust,life estate to his wife,remainder to charity.If Daniel's executor does not make a QTIP election,the use of the alternate valuation date is possible.

Question 7

A lifetime transfer that is supported by full and adequate consideration is not a gift.

Question 8

Kim,a resident and citizen of Korea,dies during an operation at the Mayo Clinic in Rochester (MN).Just because Kim died in the U.S. ,he will not be subject to the Federal estate tax.

Question 9

For Federal estate tax purposes,the gross estate does not include property that will pass to a surviving spouse.

Question 10

One of the reasons the estate tax was enacted was to prevent the avoidance of the gift tax by the making of "deathbed gifts."

Question 11

The election of the alternate valuation date can affect the amount of a marital deduction allowed to an estate for a bequest to a surviving spouse.

Question 12

Paul,a U.S.citizen,will avoid the Federal estate tax if he becomes a Canadian resident and owns no property located in the U.S.at the time of his death.

Question 13

The election of the alternate valuation date does not include any income earned by the property after the date the deceased owner died.

Question 14

Under the alternate valuation date election,each asset in the gross estate is valued at the lesser of the date of death value or six months thereafter.

Question 15

Becky made taxable gifts in 1974,1986,and 2009.In computing the gift tax on the 2009 gift,she must consider all of the prior taxable gifts.

Question 16

In community property states,all property acquired after marriage by either spouse is community property.

Question 17

José,a citizen and resident of Panama,makes a gift of ExxonMobil stock to his children.Because ExxonMobil is a U.S.corporation,José will be subject to the U.S.Federal gift tax.

Question 18

At one point,the tax rates applicable to transfers by gift were lower than those applying to transfers by death.

Question 19

An estate tax is a tax on the right of an heir to receive property on the death of the owner.

Question 20

For Federal estate and gift tax purposes,the exemption equivalent is the same thing as the bypass amount.

Question 21

A timely issued disclaimer by an heir transfers the property to someone else without a Federal gift tax result.

Question 22

The deemed paid credit allowed for past taxable gifts can be more than the tax actually paid.

Question 23

Sandy pays a local college for her non-dependent boyfriend's tuition.The payment is subject to the Federal gift tax.

Question 24

For gift tax purposes,a property settlement in consideration of marriage (i.e. ,prenuptial agreement)is treated the same as a property settlement incident to a divorce.

Question 25

The use of the election to split gifts under § 2513 is not necessary for spouses who live in community property states.

Question 26

Transfers to political organizations are not exempt from the application of the Federal gift tax.

Question 27

In determining whether a dividend issued on stock held by a decedent is included in the gross estate,the record date (rather than the declaration or payment dates)controls.

Question 28

Under his grandfather's will,Tad is entitled to receive shares of Kroger Corporation.For Federal tax purposes,Tad is not allowed to disclaim some of these shares and accept the others.

Question 29

Interest on state and local bonds is subject to neither the Federal income tax nor the Federal estate tax.

Question 30

Mitch pays the surgeon and the hospital for his aunt's gall bladder operation.If the aunt is not Mitch's dependent,the transfer is subject to the gift tax.

Question 31

In 2009,grandparents contribute jointly owned funds to a § 529 qualified tuition plan on behalf of their granddaughter.The maximum annual exclusion allowed to them is $65,000 ($13,000 ´ 5 years).

Question 32

If a donor has a fiscal year of July 1-June 30 for income tax purposes,this does not change the normal filing date for Form 709.

Question 33

To make the election to split gifts under § 2513,spouses must file a Form 709 (Federal gift tax return).

Question 34

A gift between spouses that does not qualify for the marital deduction will require the filing of a Federal gift tax return (Form 709).

Question 35

A Federal gift tax return need not be filed if no gift tax is payable.

Question 36

In a § 2503(c)trust for minors,the trustee can be given the power to accumulate income without the gift violating the future interest rule.

Question 37

If interest is provided for in loans between related parties,there is no imputed interest,as a gift loan does not result.

Question 38

A transfer in trust in which the trustee has the power to accumulate income is a gift of a future interest even if the trustee never exercises the power.

Question 39

Although qualified tuition plans under § 529 are treated favorably for gift tax purposes,such plans are subject to estate tax consequences upon the grantor's death.

Question 40

Sam purchases a U.S.savings bond which he registers as follows: "Sam,payable to Don upon Sam's death." A gift occurs when Sam dies.

Question 41

Using his separate funds,Wilbur purchases an annuity which pays him a specified amount until death.Upon Wilbur's prior death,a reduced amount is to be paid to Marcia for her life.Wilbur predeceases Marcia.Nothing concerning the annuity contract is included in Wilbur's gross estate.

Question 42

In 2007,Katherine made some taxable gifts upon which she paid a Federal gift tax of $96,000.If Katherine dies in 2009,the $96,000 is included in her gross estate under the "gross up" rule.

Question 43

In 2000,Irv creates a revocable trust,income payable to his children for life,remainder to his grandchildren.In 2008,Irv relinquishes the power to revoke the trust.If Irv dies in 2009,the trust is not included in his gross estate.

Question 44

Rachel owns an insurance policy on the life of Albert with Belle as the designated beneficiary.Upon Rachel's prior death,nothing regarding this policy is included in her gross estate.

Question 45

Two brothers,Sam and Bob,acquire real estate as equal tenants in common.Of the purchase price of $200,000,Sam furnished $80,000 while Bob provided the balance.If Sam dies first ten years later when the real estate is worth $600,000,his estate includes $240,000 as to the property.

Question 46

Reba purchases U.S.savings bonds which she lists in the name of Rod,Reba's son.The purchase of the bonds does not constitute a gift.

Question 47

Lyle and Beatrice are brother and sister.Using his funds,Lyle purchases land,listing title as: "Lyle and Beatrice,joint tenants with right of survivorship." If Lyle dies first,all of the land is included in his gross estate.

Question 48

Georgia owns an insurance policy on the life of Jake,with Scarlet as the designated beneficiary.Upon Scarlet's prior death,no transfer tax consequences result.

Question 49

Harry and Brenda are husband and wife.Using his funds,Harry purchases real estate which he lists as: "Harry and Brenda,tenants by the entirety with right of survivorship." If Brenda dies first,none of the real estate will be included in her gross estate.

Question 50

Frank owns an insurance policy on the life of Cynthia,with Leon as the designated beneficiary.Upon Cynthia's prior death,Frank is treated as making a gift of the insurance proceeds to Leon.

Question 51

A surviving spouse's share of the community property is not included in the deceased spouse's gross estate.

Question 52

Cary and Bo are husband and wife.Using their community funds,they create a trust,life estate to Bo,remainder to their children.Four years later,Cary predeceases Bo.Nothing as to this trust is included in Cary's gross estate.

Question 53

At the time of his death,Asa held a Roth IRA account with his wife as the designated beneficiary.As to the IRA,none of it is included in Asa's gross estate.

Question 54

Under the terms of a trust created by Billie,Jody (Billie's brother)has the right to determine how its income is to be divided among Billie's children.Jody holds a special power of appointment.

Question 55

In 2008 and with $100,000,Ronald establishes a joint savings account with his cousin,Allison.In 2009,Allison withdraws the $100,000 and disappears.Ronald made a gift to Allison in 2009.

Question 56

At the time of her death,Abigail held a general power of appointment over a trust created by her grandmother in 1980.Since Abigail never exercised the general power,none of the trust is included in her gross estate.

Question 57

Harry and Brenda are husband and wife.Using his funds,Harry purchases real estate which he lists as: "Harry and Brenda,tenants by the entirety with right of survivorship." If Harry dies first,only one-half of the value of the real estate will be included in his gross estate.

Question 58

Under Terry's will,Tyrone has the power to determine how the income from a trust is to be divided between her children.The power that Tyrone holds also permits him to appoint to himself as much of the trust income as is necessary to maintain his health.The power Tyrone holds is general (and not special).

Question 59

At the time of her death,Stefanie held a promissory note from a loan she had made to her son.If Stefanie's will forgives the loan,nothing regarding the note is included in her gross estate.

Question 60

Death does not defeat a deceased spouse's interest in community property.

Question 61

In 1998,Katelyn inherited considerable property when her father died.When Katelyn dies in 2009,her estate may be able to use § 2013 (credit for tax on prior transfers)as to some of the estate taxes paid by her father's estate.

Question 62

The current top Federal transfer tax rate of 45% is the highest that the rate ever has been.

Question 63

At the time of his prior death,Raul owned a residence with his wife,Manuela,as tenants by the entirety.The residence was purchased by Manuela ten years ago at a cost of $300,000 and has a fair market value of $1.4 million.Raul's estate should be allowed no marital deduction as to the property.

Question 64

At the time of her death in 2009,Emma still owed $36,000 on her church pledge for the year.If church pledges are not an enforceable obligation in the state where Emma resided,her estate cannot claim a deduction for the $36,000 it later pays.

Question 65

To avoid the terminable interest limitation on the marital deduction,the surviving spouse must be granted a general power of appointment over the trust property,or a QTIP election must be made.

Question 66

As a result of a fatal auto accident,Irene totaled a Bentley worth $95,000.If the insurance company covers $60,000 of the loss,Irene's estate can claim a deduction of $35,000 in arriving at the taxable estate.

Question 67

Lila is the owner and beneficiary of a policy on the life of her husband,Austin.Upon Austin's prior death,the insurance proceeds paid to Lila qualify for the marital deduction.

Question 68

In arriving at the taxable estate,expenses incurred in administering community property are deductible only in proportion to the deceased spouse's interest in the community.

Question 69

By his will,all of Rusty's property passes outright to his wife,Patsy.As Patsy was not given a general power of appointment or Rusty's executor did not make a QTIP election,Rusty's estate is not allowed a marital deduction.

Question 70

In the case of a transfer by gift,a QTIP election causes the property to be subject to the estate tax upon the death of the donee spouse.

Question 71

At the time of his death,Hal owned 10 cemetery lots worth $40,000 ($4,000 each)for use by himself and his family.These lots are included in Hal's gross estate and a deduction of $4,000 is allowed the estate.

Question 72

Manfredo makes a donation of $50,000 to the church where he was baptized in Mexico City.The gift does not qualify as a charitable contribution for Federal income tax purposes.

Question 73

In his will,Hernando provides for $50,000 to go to the Madrid,Spain,school system.Since it is a foreign charity,the bequest will not qualify as a charitable deduction for estate tax purposes.

Question 74

Sally's will passes real estate to Otto (her surviving spouse).The real estate is worth $800,000 but is subject to a mortgage of $200,000.The transfer provides Sally's estate with a marital deduction of $600,000.

Question 75

Since the credit for state death taxes paid (under § 2011)has been eliminated,no double tax relief is available to an estate that is subject to both Federal and state death taxes.

Question 76

The same charitable organizations that qualify for income tax purposes qualify for estate tax purposes.

Question 77

The purpose of the marital deduction is to place married decedents in common law states on par with those in community property jurisdictions.

Question 78

Sidney dies and leaves property to his sister Giselle.Three years later,Giselle dies.Under § 2013 (credit for tax on prior transfers),Giselle's estate can claim a full credit for any Federal estate taxes paid by Sidney's estate as to amounts passing to Giselle.

Question 79

At the time of his death in 2009,Leroy owed Federal income taxes on income earned in 2007.Leroy's estate cannot claim an estate tax deduction for the income tax it pays.

Question 80

A marital deduction can be allowed even if the surviving spouse is a nonresident alien.