Question 1

Mike transfers securities to an irrevocable trust and gives Rachel the power to determine who will receive the trust's income and assets.Rachel,her estate,and her creditors cannot be beneficiaries or receive the trust assets.Rachel has a general power of appointment.

Accepted Answer

Rachel does not have a general power of appointment because she, her estate, and her creditors cannot benefit from the trust's assets. A general power of appointment allows the holder to appoint the property to themselves, their estate, their creditors, or any other person.

Question 2

Identify which of the following statements is true.

Accepted Answer

C

Question 3

Identify which of the following statements is true.

Accepted Answer

Statement A is false because a taxable gift typically occurs when property is sold for more than its FMV. Statement C is false because the payment for medical care does not have to be made to a relative, it can be made for anyone. Statement D is false because statement B is true. An individual can make an inadvertent gift by selling property to a relative for less than its FMV, which could trigger gift tax implications.

Question 4

Identify which of the following statements is true.

Accepted Answer

The statement that under the unified transfer tax system, taxable gifts made after 1976 are included in the donor's death tax base is true. The other statements are false. The gift tax is a separate tax from the estate tax and is not levied on transfers at death. Additionally, the gift tax is part of the unified transfer tax system, which includes both the gift tax and the estate tax, but they are treated separately.

Question 5

In the current year,Cesar,who is single,gives $26,000 to each of his 20 nieces and nephews for a total property transfer of $520,000.Cesar's taxable gifts total

Accepted Answer

D)
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Question 6

The annual exclusion permits donors to make gifts of $14,000 each to multiple donees.

Accepted Answer

The annual exclusion for 2020 allows donors to give up to $14,000 per year to each recipient without triggering gift taxes. This means that a donor can give this amount to multiple donees without incurring any tax liability.

Question 7

A net gift occurs when a donor makes a gift subject to the agreement that the recipient agrees to pay the gift tax.

Accepted Answer

A net gift is a type of gift where the donor agrees to pay the gift tax, instead of the recipient. Therefore, the statement is true.

Question 8

Molly sells her car,valued at $30,000,to her nephew Todd for $18,000.Molly has made a taxable gift.

Accepted Answer

Molly has sold the car for $12,000 less than its value, which is considered a gift to her nephew. This gift may be subject to gift tax, hence it is a taxable gift.

Question 9

Barbara sells a house with an FMV of $170,000 to her daughter for $120,000.From this transaction,Barbara is deemed to have made a gift (before the annual exclusion)of

Accepted Answer

The FMV of the house is $170,000, but Barbara sells it to her daughter for $120,000. This means Barbara has made a gift of $50,000 ($170,000 - $120,000) before any annual exclusion is applied.

Question 10

In November 1976,Grant uses $30,000 of the specific exemption available at that time.The unified credit available to Grant for post-1976 transfers is reduced by

Accepted Answer

The unified credit for post-1976 transfers was $192,800 in 2020. The specific exemption in 1976 was $30,000. Therefore, the reduction in the unified credit available to Grant would be equal to the amount of the specific exemption used ($30,000). Therefore, the unified credit available to Grant would be reduced by $30,000, leaving $162,800.

Question 11

In October 1976,Marian made a large taxable gift.It was her first gift.Marian used her $30,000 specific exemption to reduce her taxable gift amount.What impact does this gift have on her unified credit and death tax base?

Accepted Answer

The answer of In October 1976,Marian made a large taxable...

Question 12

The changing of a life insurance policy beneficiary from a spouse to an adult daughter constitutes a gift for transfer tax purposes.

Accepted Answer

Changing a beneficiary on a life insurance policy does not constitute a gift for transfer tax purposes because the change in beneficiary does not transfer any present interest or economic benefit to the new beneficiary until the death of the insured.

Question 13

Jennifer and Terry,a married couple,live in Illinois; which is a common law state.In the current year,Terry gives his sister $200,000 cash.Jennifer and Terry agree to gift splitting.Neither Jennifer nor Terry has made any taxable gifts in prior years.What are Jennifer and Terry's taxable gifts?

Accepted Answer

The answer of Jennifer and Terry,a married couple,live in Illinois;...

Question 14

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 15

In 1998,Delores made taxable gifts to her son of property with an FMV of $200,000.In the current year when Delores dies,the property is worth $800,000.The amount included in Delores's estate tax base because of the 1998 gift is

Accepted Answer

The taxable gifts made by Delores during her lifetime are added to determine her estate tax base. Therefore, the amount included in Delores's estate tax base because of the 1998 gift is the full FMV of the property at the time of the gift, which is $200,000. The current FMV of the property at the time of Delores's death is not relevant for determining the estate tax base for this gift.

Question 16

Phil transfers $50,000 to a revocable trust benefiting his son,Josh.The transfer is a taxable gift.

Accepted Answer

Since Phil can revoke the trust and take back the assets, for tax purposes, he has not made a completed gift. Therefore, it is not considered a taxable gift.

Question 17

A qualified disclaimer must be made within nine months after (a)the day the property is transferred,or (b)the day the person receiving the property becomes age 21,whichever is later.

Accepted Answer

A qualified disclaimer must be made within nine months after the day the property is transferred or the day the person receiving the property becomes age 21, whichever is later, as per the Internal Revenue Service.

Question 18

Mia makes a taxable gift when she makes her mother a joint owner on Mia's bank account.Mia has $25,000 in the account.

Accepted Answer

The answer of Mia makes a taxable gift when she...

Question 19

The gift tax is a wealth transfer tax that applies to transfers during a person's lifetime and transfers at death.

Accepted Answer

The gift tax applies only to transfers made during a person's lifetime. The estate tax applies to transfers at death.

Question 20

In the current year,Bonnie,who is single,sells stock valued at $60,000 to Linda for $15,000.Later that year,Bonnie gives Linda $25,000 in cash.Bonnie's taxable gifts from these transfers total

Accepted Answer

Bonnie's taxable gifts include both the sale of stock and the gift of cash. The sale of stock results in a gift of $60,000 - $15,000 = $45,000. The gift of cash is $25,000. Therefore, Bonnie's taxable gifts are $45,000 + $25,000 = $70,000. However, the first $14,000 of each gift is exempt from the gift tax, so the taxable amount is reduced by $14,000 for each gift. This means that Bonnie's taxable gifts are actually $70,000 - $14,000 - $14,000 = $42,000. However, she also has to pay tax on the sale of the stock, which is equal to the difference between the sale price and the value of the stock at the time she acquired it. If Bonnie acquired the stock for less than $15,000, her taxable gifts would be higher. But as she sold it for $15,000 that completely covers the value of the stock at the time acquire it. So, Bonnie's taxable gifts total $42,000 + $14,000 (for the cash gift) = $56,000. Therefore, the correct choice is C.

Quiz 23: The Gift Tax

Mike transfers securities to an irrevocable trust and gives Rachel the power to determine who will receive the trust's income and assets.Rachel,her estate,and her creditors cannot be beneficiaries or receive the trust assets.Rachel has a general power of appointment.

Identify which of the following statements is true.

Identify which of the following statements is true.

Identify which of the following statements is true.

In the current year,Cesar,who is single,gives $26,000 to each of his 20 nieces and nephews for a total property transfer of $520,000.Cesar's taxable gifts total

The annual exclusion permits donors to make gifts of $14,000 each to multiple donees.

A net gift occurs when a donor makes a gift subject to the agreement that the recipient agrees to pay the gift tax.

Molly sells her car,valued at $30,000,to her nephew Todd for $18,000.Molly has made a taxable gift.

Barbara sells a house with an FMV of $170,000 to her daughter for $120,000.From this transaction,Barbara is deemed to have made a gift (before the annual exclusion) of

In November 1976,Grant uses $30,000 of the specific exemption available at that time.The unified credit available to Grant for post-1976 transfers is reduced by

In October 1976,Marian made a large taxable gift.It was her first gift.Marian used her $30,000 specific exemption to reduce her taxable gift amount.What impact does this gift have on her unified credit and death tax base?

The changing of a life insurance policy beneficiary from a spouse to an adult daughter constitutes a gift for transfer tax purposes.

Jennifer and Terry,a married couple,live in Illinois; which is a common law state.In the current year,Terry gives his sister $200,000 cash.Jennifer and Terry agree to gift splitting.Neither Jennifer nor Terry has made any taxable gifts in prior years.What are Jennifer and Terry's taxable gifts?

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

In 1998,Delores made taxable gifts to her son of property with an FMV of $200,000.In the current year when Delores dies,the property is worth $800,000.The amount included in Delores's estate tax base because of the 1998 gift is

Phil transfers $50,000 to a revocable trust benefiting his son,Josh.The transfer is a taxable gift.

A qualified disclaimer must be made within nine months after (a)the day the property is transferred,or (b)the day the person receiving the property becomes age 21,whichever is later.

Mia makes a taxable gift when she makes her mother a joint owner on Mia's bank account.Mia has $25,000 in the account.

The gift tax is a wealth transfer tax that applies to transfers during a person's lifetime and transfers at death.

In the current year,Bonnie,who is single,sells stock valued at $60,000 to Linda for $15,000.Later that year,Bonnie gives Linda $25,000 in cash.Bonnie's taxable gifts from these transfers total