Question 1

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 asa tenant in common or asa 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 2

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 it is included in the gross estate or not.

Question 3

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 4

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

Accepted Answer

The debts of the decedent are deductible in calculating the taxable estate.

Question 5

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

Accepted Answer

A present interest grants the holder the right to enjoy property or receive income payments from it currently.

Question 6

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

Accepted Answer

The gross estate includes all property owned by the decedent at the time of death, including assets that may pass outside of probate such as jointly owned property, life insurance policies with a named beneficiary, and certain types of trusts.

Question 7

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 8

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...

Question 9

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 10

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 11

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 in accordance with the definition of fair market value as per United States tax law.

Question 12

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, as the proceeds are considered assets of the decedent's estate.

Question 13

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 gifts in excess of the annual exclusion amount or if the taxpayer has utilized a portion of their lifetime exemption amount. The applicable credit determines the amount of gift tax that may be owed and is not a threshold for filing a gift tax return.

Question 14

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

Accepted Answer

This is because a terminable interest is an interest that will terminate upon the occurrence of a specific event, such as the death of the income beneficiary. As a result, it does not qualify for the marital deduction, which allows a spouse to transfer property to their surviving spouse tax-free.

Question 15

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 16

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 true according to the Internal Revenue Code, section 2042. If the decedent had the ability to change the beneficiary designation, the proceeds of the life insurance policy are considered part of the decedent's gross estate.

Question 17

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 18

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

In joint tenancy with the right of survivorship, the surviving spouse automatically receives the deceased spouse's share of the property upon death. However, for estate tax purposes, the deceased spouse's share is included in their gross estate.

Question 19

The testamentary transfer of property to a qualified charity is deductible in calculating the taxable estate without any ceiling limitation.

Accepted Answer

The testamentary transfer of property to a qualified charity is deductible in calculating the taxable estate without any ceiling limitation under the federal estate and gift tax system.

Question 20

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.

Quiz 25: Transfer Taxes and Wealth Planning