Question 1

Steve gave stock with an adjusted basis of $7,000 and an FMV of $10,000 to Alice. No gift tax was paid. Later, Alice sold the stock for $12,000. The gain Alice will recognize on the sale is

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Question 2

Identify which of the following statements is false.

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Question 3

Discuss the negative aspects of gifts.

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Question 4

Roger makes a $1,000,000 cash gift on January 1 of the current year, and dies on February 1 of the current year. Roger's gift tax return is due

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Question 5

Tracy gave stock with an adjusted basis of $18,000 and an FMV of $15,000 to her nephew Phil. No gift tax was paid. Phil sold the stock for $16,000. The gain or loss Phil will recognize on the sale is

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Question 6

Elaine loaned her brother, Mike, $175,000 to purchase a new home. Elaine does not charge Mike any interest on the loan. What are the tax consequences to Elaine and Mike?

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Since Elaine is not charging any interest on the loan, the forgone interest is considered a gift to Mike. Elaine may have to file a gift tax return if the amount exceeds the annual gift tax exclusion ($15,000 per recipient in 2021). However, Elaine can also use a portion of her lifetime gift tax exemption ($11.7 million in 2021) to avoid paying gift tax. Mike does not have any tax consequences as he is not receiving any income from the loan.

Question 7

Ed gives Steve land with an adjusted basis of $40,000 and an FMV of $90,000. Ed paid no gift tax. Ed then inherits the same land back from Steve at Steve's death eight months later. At Steve's death, the land is worth $120,000. Ed's basis in the land becomes

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Question 8

Miguel gives Roberta land with an adjusted basis of $50,000 and an FMV of $40,000. No gift tax is paid. Roberta sells the land for $36,000. Roberta recognizes

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Question 9

The purchase of a $20,000 engagement ring generates a taxable gift necessitating the filing of a gift tax return.

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The purchase of a $20,000 engagement ring would likely exceed the annual gift tax exclusion amount, which can change year to year, but was $15,000 in 2021. Any amount above the annual exclusion must be reported on a gift tax return.

Question 10

On January 1, Jeff loans his friend Patrick $7,000 to buy a used car. Patrick signs a noninterest- bearing demand note. The applicable interest rate is 5%. Which of the following statements is correct?

Accepted Answer

Because the loan amount is less than $10,000 and there is no tax avoidance motive, interest does not have to be imputed on the gift. Therefore, Jeff does not need to report any interest income or make any taxable gift.

Question 11

In 2018, Letty makes taxable gifts totaling $4 million. Her only other taxable gifts amount to $1 million, all of which were made in 2012. What is Letty's 2018 gift tax liability before the unified credit?

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Question 12

Gift tax returns are filed on a calendar- year basis.

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Gift tax returns are filed on a calendar-year basis, meaning they cover gifts made from January 1st to December 31st of a given year.

Question 13

Terry is considering transferring assets valued at $400,000 to an irrevocable trust for the benefit of her son, Cliff, age 15, with First National Bank as trustee. Her attorney has drafted a trust agreement that provides that Cliff is to receive income at the trustee's discretion for the next 20 years and that at age 35, the trust assets will be distributed equally between Cliff and his sister Joanna. Terry anticipates that her husband will consent to gift splitting. What tax issues should Terry and her husband consider with respect to the trust she is creating?

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Question 14

Gloria makes the following gifts during the year: $16,000 cash to her son, Andy
Stock with a basis of $10,000 and a $31,000 fair market value to her sister, Helen
$100,000 to a revocable trust benefiting her nephew, George
Land with a basis of $60,000 and a fair market value of $50,000 to the American Cancer Societ
Before considering the unified credit, what are Gloria's taxable gifts?

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Question 15

Virginia gave stock with an adjusted basis of $8,000 and an FMV of $10,000 to Carmen. No gift tax was paid on the transfer. Carmen then sold the stock for $9,000. The gain or loss Carmen will recognize on the sale is

Accepted Answer

Carmen's basis is the same as Virginia's adjusted basis, which is $8,000. When Carmen sells the stock for $9,000, she will realize a $1,000 gain ($9,000 sales price - $8,000 basis). Therefore, the correct answer is option B.

Question 16

Identify which of the following statements is true.

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Question 17

The computation of the gift tax liability for a current year

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The computation of the gift tax liability for a current year requires the use of current-year tax rates only. There are no different rates based on when the gifts were made, and also knowledge of the total gift taxes paid in previous years is not required for the current year's liability calculation.

Question 18

On July 1, Frank loans his brother Matt $200,000. The loan is evidenced by an interest- free demand note. The loan is still outstanding on December 31. The applicable interest rate is 12%. Frank is treated as having made a gift of

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Question 19

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

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Question 20

Interest- free or below- market loans

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Interest-free or below-market loans may result in treating the borrower as paying interest, which will be imputed as income to the lender. However, if the loan amount is below a certain threshold (currently $10,000), then no interest income needs to be imputed. Therefore, option A is incorrect. Option C is incorrect because not all interest-free or below-market loans are subject to the $1,000 imputed interest rule. Option D is incorrect because there are exceptions where interest does not need to be imputed.

Quiz 12: The Gift Tax

Steve gave stock with an adjusted basis of $7,000 and an FMV of $10,000 to Alice. No gift tax was paid. Later, Alice sold the stock for $12,000. The gain Alice will recognize on the sale is

Identify which of the following statements is false.

Discuss the negative aspects of gifts.

Roger makes a $1,000,000 cash gift on January 1 of the current year, and dies on February 1 of the current year. Roger's gift tax return is due

Tracy gave stock with an adjusted basis of $18,000 and an FMV of $15,000 to her nephew Phil. No gift tax was paid. Phil sold the stock for $16,000. The gain or loss Phil will recognize on the sale is

Elaine loaned her brother, Mike, $175,000 to purchase a new home. Elaine does not charge Mike any interest on the loan. What are the tax consequences to Elaine and Mike?

Ed gives Steve land with an adjusted basis of $40,000 and an FMV of $90,000. Ed paid no gift tax. Ed then inherits the same land back from Steve at Steve's death eight months later. At Steve's death, the land is worth $120,000. Ed's basis in the land becomes

Miguel gives Roberta land with an adjusted basis of $50,000 and an FMV of $40,000. No gift tax is paid. Roberta sells the land for $36,000. Roberta recognizes

The purchase of a $20,000 engagement ring generates a taxable gift necessitating the filing of a gift tax return.

On January 1, Jeff loans his friend Patrick $7,000 to buy a used car. Patrick signs a noninterest- bearing demand note. The applicable interest rate is 5%. Which of the following statements is correct?

In 2018, Letty makes taxable gifts totaling $4 million. Her only other taxable gifts amount to $1 million, all of which were made in 2012. What is Letty's 2018 gift tax liability before the unified credit?

Gift tax returns are filed on a calendar- year basis.

Virginia gave stock with an adjusted basis of $8,000 and an FMV of $10,000 to Carmen. No gift tax was paid on the transfer. Carmen then sold the stock for $9,000. The gain or loss Carmen will recognize on the sale is

Identify which of the following statements is true.

The computation of the gift tax liability for a current year

On July 1, Frank loans his brother Matt $200,000. The loan is evidenced by an interest- free demand note. The loan is still outstanding on December 31. The applicable interest rate is 12%. Frank is treated as having made a gift of

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

Interest- free or below- market loans