Question 1

Classify each statement appearing below.
-In full settlement of her marital rights, Henry transfers property to his wife, Nancy. Three months later, Henry and Nancy are divorced.

Accepted Answer

The transfer of property in full settlement of marital rights is not considered a taxable gift or subject to estate tax. The subsequent divorce does not affect this determination.

Question 2

Classify each statement appearing below.
-Hugh loans his adult daughter, Nadia, $800,000 to start her own business. Market rate interest is provided for, and Nadia signs a note that is payable in four years.

Accepted Answer

Since Hugh is charging market rate interest and Nadia is signing a note, this is considered a loan and not a gift. Therefore, no taxable transfer occurs and gift tax or estate tax do not apply.

Question 3

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

Accepted Answer

The answer of Match each statement with the correct choice....

Question 4

Classify each statement appearing below.
-Harry pays for the tuition for his niece to attend Drake University. The niece does not qualify as Harry's dependent.

Accepted Answer

Since the niece does not qualify as Harry's dependent, this transfer is not subject to gift tax or estate tax. It is simply a personal expense paid by Harry.

Question 5

Match each statement with the correct choice. Some choices may be used more than once or not at all.
-Election to split gifts (§ 2513)

Accepted Answer

The answer of Match each statement with the correct choice....

Question 6

Classify each statement appearing below.
-Hector transfers funds to his aunt so she can obtain a much needed heart bypass operation. The aunt does not
qualify as Hector's dependent.

Accepted Answer

The answer of Classify each statement appearing below.
-Hector transfers funds...

Question 7

Match each statement with the correct choice. Some choices may be used more than once or not at all.
-Alternate valuation date (§ 2032)

Accepted Answer

The answer of Match each statement with the correct choice....

Question 8

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

Accepted Answer

The answer of Match each statement with the correct choice....

Question 9

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

Accepted Answer

Joint tenancy is characterized by the right of survivorship, meaning when one joint tenant dies, their interest in the property automatically passes to the surviving joint tenant(s).

Question 10

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

Accepted Answer

The answer of Match each statement with the correct choice....

Question 11

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

Accepted Answer

The answer of Match each statement with the correct choice....

Question 12

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

Accepted Answer

The answer of Match each statement with the correct choice....

Question 13

Classify each statement appearing below.
-Under a prenuptial agreement, Herbert transfers stock to Norma. One month later, Herbert and Norma are married.

Accepted Answer

The answer of Classify each statement appearing below.
-Under a prenuptial...

Question 14

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

Accepted Answer

The answer of Match each statement with the correct choice....

Question 15

When one spouse predeceases the other, the credit for prior transfers does not apply.
a. Why?
b. Under what circumstances might the credit apply?

Accepted Answer

The answer of When one spouse predeceases the other, the...

Question 16

Match each statement with the correct choice. Some choices may be used more than once or not at all.
-Credit for tax on prior transfers (under § 2013)

Accepted Answer

The credit for tax on prior transfers (under § 2013) applies when there has been a prior transfer subject to estate or gift tax within the past 10 years. In this scenario, Debby inherited wealth from her brother, which may have been subject to estate or gift tax, and therefore could potentially qualify for the credit.

Answer: D 
 A state estate tax is a type of tax on transfers by death imposed by some states. The credit for tax on prior transfers (under § 2013) may be available to reduce the federal estate tax, but it does not apply to state estate tax.

Answer: E 
 The credit for tax on prior transfers (under § 2013) reduces the taxable estate by the amount of tax paid on prior transfers, so it must decrease the amount of the gross estate.

Answer: G 
 The credit for tax on prior transfers (under § 2013) is cumulative in effect, meaning that if it is not fully used in one year, the unused portion carries forward to subsequent years.

Answer: J 
 The exemption equivalent is the amount of the credit for tax on prior transfers (under § 2013), which is currently set at $11.58 million for 2020.

Answer: L 
 No correct match provided for choices B, C, F, H, I, or K.

Question 17

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

Accepted Answer

The answer of Match each statement with the correct choice....

Question 18

Classify each statement appearing below.
-Hugh loans his adult daughter, Nadia, $800,000 to start her own business. No interest is provided for, and Nadia signs a note that is payable in four years.

Accepted Answer

The answer of Classify each statement appearing below.
-Hugh loans his...

Question 19

Classify each statement appearing below.
-Under her father's will, Faith is to receive 10,000 shares of GE common stock. Ten months after her father's
death, Faith disclaims 10,000 shares.

Accepted Answer

The answer of Classify each statement appearing below.
-Under her father's...

Question 20

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

Accepted Answer

Tenancy in common means that each owner has a distinct, divisible interest in the property, which does not automatically transfer to the other owners upon death. Thus, death does not defeat an owner's interest in property; it passes to their heirs or as directed by their will, not to the other tenants in common.

Quiz 27: The Federal Gift and Estate Taxes

Classify each statement appearing below. -In full settlement of her marital rights, Henry transfers property to his wife, Nancy. Three months later, Henry and Nancy are divorced.

Classify each statement appearing below. -Hugh loans his adult daughter, Nadia, $800,000 to start her own business. Market rate interest is provided for, and Nadia signs a note that is payable in four years.

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

Classify each statement appearing below. -Harry pays for the tuition for his niece to attend Drake University. The niece does not qualify as Harry's dependent.

Match each statement with the correct choice. Some choices may be used more than once or not at all. -Election to split gifts (§ 2513)

Classify each statement appearing below. -Hector transfers funds to his aunt so she can obtain a much needed heart bypass operation. The aunt does not qualify as Hector's dependent.

Match each statement with the correct choice. Some choices may be used more than once or not at all. -Alternate valuation date (§ 2032)

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

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

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

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

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

Classify each statement appearing below. -Under a prenuptial agreement, Herbert transfers stock to Norma. One month later, Herbert and Norma are married.

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

When one spouse predeceases the other, the credit for prior transfers does not apply. a. Why? b. Under what circumstances might the credit apply?

Match each statement with the correct choice. Some choices may be used more than once or not at all. -Credit for tax on prior transfers (under § 2013)

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

Classify each statement appearing below. -Hugh loans his adult daughter, Nadia, $800,000 to start her own business. No interest is provided for, and Nadia signs a note that is payable in four years.

Classify each statement appearing below. -Under her father's will, Faith is to receive 10,000 shares of GE common stock. Ten months after her father's death, Faith disclaims 10,000 shares.

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