Question 1

The gross estate includes the value of half of real property owned by a decedent and spouse in joint tenancy with the right of survivorship.

Accepted Answer

When a married couple owns real property in joint tenancy with the right of survivorship, the entire value of the property is included in the decedent's gross estate for estate tax purposes, even though only half of the property was owned by the decedent.

Question 2

The gift-splitting election only applies to gifts made by taxpayers who reside in community-property states.

Accepted Answer

The gift-splitting election applies to married couples, allowing them to treat gifts made by either spouse as though each spouse contributed half of the gift, regardless of the donor's state of residence. This is not limited to community-property states.

Question 3

Including adjusted taxable gifts in the taxable estate causes these gifts to be taxed twice,once under the gift tax and again under the estate tax.

Accepted Answer

Including adjusted taxable gifts in the taxable estate does not result in double taxation because the estate tax calculation includes a credit for any gift tax previously paid on those gifts. This ensures that the value transferred by the decedent, either during life or at death, is taxed only once.

Question 4

The debts of the decedent at the time of death are deducted in calculating the taxable estate.

Accepted Answer

Debts of the decedent, such as mortgages, loans, and other liabilities, are deducted from the value of the estate to calculate the taxable estate.

Question 5

The gross estate will not include the value of clothes and other personal items owned by the decedent at the time of death.

Accepted Answer

The gross estate includes the total value of all assets owned by the decedent at the time of death, including clothes and other personal items.

Question 6

Proceeds of life insurance paid to the decedent's estate due to the death of the decedent are included in the decedent's gross estate even if the decedent had no ownership rights in the policy at the time of death.

Accepted Answer

This is true according to IRS regulations. The proceeds are included in the gross estate because they are considered an asset of the decedent's estate, even if the policy was owned by someone else.

Question 7

A transfer of a terminable interest will not generally qualify for a marital deduction.

Accepted Answer

A terminable interest, by definition, is an interest that terminates upon the occurrence of a specified event or at a specified time. Because it is not a permanent interest, it does not qualify for the marital deduction, which is reserved for transfers of property that result in a permanent benefit to the surviving spouse.

Question 8

A present interest is the right to currently enjoy property or receive income payments from property.

Accepted Answer

A present interest gives the holder the current right to enjoy property or receive income payments from property. This is in contrast to a future interest, which confers the right to property or income payments at a later date.

Question 9

A terminable interest in property is any interest that terminates during the current year.

Accepted Answer

A terminable interest in property is one that ends upon the occurrence of a specified event or after a set period of time, not necessarily within the current year.

Question 10

Property is included in the gross estate at the value a willing buyer would pay a willing seller,neither being under any compulsion to buy or to sell,and both having reasonable knowledge of the relevant facts.

Accepted Answer

This statement is a correct definition of the fair market value, which is used to determine the value of property included in the gross estate for estate tax purposes.

Question 11

Proceeds of life insurance paid due to the death of the decedent are included in the decedent's gross estate if the decedent had the right to designate the beneficiary of the policy.

Accepted Answer

This is in accordance with the Internal Revenue Code section 2042. If the decedent had the right to designate the beneficiary, the proceeds are deemed to have been under the decedent's control and are therefore included in the gross estate.

Question 12

A gift tax return does not need to be filed unless the taxpayer has made current gifts in excess of the applicable credit.

Accepted Answer

A gift tax return must be filed if the taxpayer has made current gifts in excess of the annual exclusion amount ($15,000 in 2021) or if they have utilized any of their lifetime gift tax exemption amount (currently $11.7 million for individuals in 2021).

Question 13

The probate estate consists of all property owned by the decedent that is excluded from the gross estate.

Accepted Answer

The probate estate consists of all property owned by the decedent that is subject to probate, regardless of whether or not it is included in the gross estate.

Question 14

The gross estate always includes the value of half of any real property owned by a decedent and another person in joint tenancy with the right of survivorship.

Accepted Answer

The gross estate includes the entire value of real property owned in joint tenancy with the right of survivorship, not just half, unless it can be proven that the other joint tenant(s) contributed to the purchase.

Question 15

No deductions are allowed when calculating the taxable estate.

Accepted Answer

Deductions are allowed when calculating the taxable estate, including debts, administration expenses, and charitable contributions, which can reduce the size of the estate subject to taxation.

Question 16

The gross estate may contain property transfers that are not included in the probate estate.

Accepted Answer

This is true because the gross estate includes all assets and property owned by the decedent at the time of their death, including property that may pass outside of the probate process such as assets held in a trust, jointly owned property with rights of survivorship, and life insurance proceeds.

Question 17

Both spouses must consent to any gift-splitting election.

Accepted Answer

Gift-splitting is an election that allows a married couple to split the gift's value equally between them for tax purposes, regardless of who actually made the gift. Both spouses must agree to this election and consent to it by both signing the appropriate federal gift tax return (Form 709) for the year in which they want to split gifts.

Question 18

The theft of property included in the gross estate is only deductible in calculating the taxable estate if the loss exceeds 10 percent of the decedent's adjusted gross estate.

Accepted Answer

Theft losses of property included in the gross estate are deductible without regard to the 10 percent limitation. This rule applies specifically to theft losses and does not impose the 10 percent threshold that applies to some other types of deductions.

Question 19

The probate estate will include the total value of all real property owned by the decedent at the time of death regardless of whether the decedent co-owned the property as a tenant in common or as a joint tenant with the right of survivorship.

Accepted Answer

In the case of joint tenancy with the right of survivorship, the property automatically passes to the surviving co-owner(s) and does not become part of the decedent's probate estate. However, property owned as tenants in common would be included in the probate estate.

Question 20

The tax on cumulative taxable gifts is reduced by the applicable credit regardless of whether any applicable credit was used in prior years.

Accepted Answer

The answer of The tax on cumulative taxable gifts is...

Quiz 25: Transfer Taxes and Wealth Planning