Question 1

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

In a net gift, the donor typically agrees to pay the gift tax on behalf of the recipient, rather than the recipient being responsible for paying the tax themselves.

Question 2

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

Since they elect gift splitting,each spouse is considered to have given $100,000.Each spouse is entitled to a $14,000 annual exclusion.Therefore,each spouse's taxable gift is $86,000.The tax on the taxable gifts will be offset by the unified credit available to each spouse and no gift tax will be due.

Question 3

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

C)
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Question 4

Identify which of the following statements is true.

Accepted Answer

The answer of Identify which of the following statements is...

Question 5

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 6

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 was $170,000 and Barbara sold it for $120,000, meaning she made a gift of $50,000 ($170,000 - $120,000).

Question 7

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 8

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 9

Identify which of the following statements is true.

Accepted Answer

Option A is false because a taxable gift occurs when property is transferred without adequate consideration (not necessarily sold) and not necessarily in an arm's length transaction. 
Option C is false because the exemption for payments for medical care can be made for a relative or any individual. 
Option D is false because option B is true.

Question 10

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 11

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

Accepted Answer

A taxable gift occurs when a person gives a gift to another person for less than the fair market value of the item. In this scenario, Molly sold her car to her nephew for $18,000, which is less than the car's value of $30,000. Therefore, she has made a taxable gift.

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

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, according to IRS regulations.

Question 14

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 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

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 17

Identify which of the following statements is true.

Accepted Answer

The unified transfer tax system does include taxable gifts made after 1976 in the donor's death tax base, which means that such gifts are subject to both gift tax and estate tax. Option A is incorrect because the gift tax only applies to transfers during a person's lifetime, not at death. Option B is incorrect because the gift tax is indeed part of the unified transfer tax system. Option D is incorrect because option C is true.

Question 18

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 19

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

Accepted Answer

The annual exclusion for gift tax purposes allows donors to give up to $14,000 per year to as many individuals as they wish without incurring gift tax.

Question 20

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.

Quiz 12: The Gift Tax

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

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?

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

Identify which of the following statements is true.

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

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

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

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?

Identify which of the following statements is true.

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.

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

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

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.

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

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

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

Identify which of the following statements is true.

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

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

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.