Question 1

What are the requirements for classifying a transaction as a transfer of a qualified terminable interest property (QTIP)?

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Question 2

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 $15,000 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?

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Question 3

Bryce pays $10,000 for his adult grandson's tuition at medical school and $8,000 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?

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Question 4

Discuss the statutory exemptions from the gift tax.

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Question 5

Karen purchased a beach house for $300,000 and immediately titled it in the names of Karen and Kenny, as joint tenants with right of survivorship. Karen and Kenny are not married. Did a gift occur? If so, for what amount?

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Question 6

Discuss the purpose of the gift tax annual exclusion.

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Question 7

On September 1, George transfers his entire ownership rights in a $250,000 life insurance policy on his own life to his sister, Sally. The policy's interpolated terminal reserve is $30,000 as of September 1. On July 1, George had paid the policy's $6,000 annual premium. On July 1 of the subsequent year, George again paid the premium on the policy. What are the gift tax consequences in the subsequent year, if any?

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Question 8

On June 1, Sherri deposits $60,000 into a new joint bank account in the names of Sherri and John. Her friend John makes no deposits. On December 15th, John withdraws $25,000 from the joint account. What are the gift tax consequences, if any?

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Question 9

Contrast the Crummey trust with the Sec. 2503(c) trust.

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Question 10

Discuss at least two reasons for making inter vivos (lifetime) gifts.

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Question 11

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

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Question 12

Discuss the negative aspects of gifts.

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Question 13

On September 1, George transfers his entire ownership rights in a $250,000 life insurance policy on his own life to his sister, Sally. The policy's interpolated terminal reserve is $30,000 as of September 1. On July 1, George had paid the policy's $6,000 annual premium. What are the gift tax consequences, if any?

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Question 14

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?

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Question 15

Ward and June decide to divorce after 30 years of marriage. Ward transfers $500,000 to June in settlement of her property rights. What are the gift tax consequences of this transfer?

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Question 16

Yuli wants to help his adult grandson, Jerry, become a CPA. He pays all of Jerry's tuition this year, which totals $20,000. He also pays $9,000 for Jerry's room and board at school. Yuli makes the payments directly to the school. What are the gift tax consequences?

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Question 17

What is a "net gift" and what is the potential income tax problem associated with making a net gift?

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Question 18

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?

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Question 19

In 2013, Lilly makes taxable gifts aggregating $5.25 million. Her only other taxable gifts amount to $1 million, all of which were made in 1998. What is her gift tax liability?

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Question 20

In the current year, Martha makes the transfers below to her husband, Ryan. What is the amount, if any, of her marital deduction?
a) In August, she gives him a house valued at $250,000.
b) In December, she gives him a 15-year income interest in a trust with the bank name as trustee. She names her son as the remainderman. The trust is irrevocable and is funded with $500,000 of assets, and 8% is the applicable interest rate.

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Quiz 12: The Gift Tax