Question 1

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

Accepted Answer

The gross estate encompasses all property that the decedent owned or had an interest in at the time of their death, including property held in trusts, jointly-owned property, and assets with named beneficiaries such as life insurance policies and retirement accounts. Some of these assets may pass outside of probate and are not included in the probate estate, but they are still part of the decedent's gross estate for tax purposes.

Question 2

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 currently enjoy the benefits of the property or receive income payments, as opposed to a future interest which only grants an interest in the property at a later date or under certain conditions.

Question 3

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

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.

Question 4

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 due to the inclusion of the proceeds in the decedent's estate, regardless of their ownership rights at the time of death.

Question 5

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

Casualty and theft losses are deductible without any floor limitation.

Question 6

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 7

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 tenants in common or as joint tenants with the right of survivorship.

Accepted Answer

Property passing by operation of law are not included in the probate estate.

Question 8

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

Question 9

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 10

Both spouses must consent to any gift-splitting election.

Accepted Answer

Both spouses must sign and file a Form 709 to elect gift-splitting. Therefore, both spouses must give consent to the election.

Question 11

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

Accepted Answer

The gross estate consists of the probate estate plus the value of certain automatic property transfers that take effect at death.

Question 12

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 subtracted from the gross estate to determine the taxable estate for estate tax purposes.

Question 13

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 14

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

Accepted Answer

A terminable interest is right to possess and/or collect income from property for a specific period of time or until the occurrence of a specific event.

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

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 aggregate gifts to at least one recipient exceeds the annual exclusion for the year.

Question 17

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

The gross estate includes the value of all property, including real property, owned by the decedent at the time of death, and also includes the value of any property in which the decedent had an interest at the time of death, such as joint tenancy with the right of survivorship. In the case of real property owned by a decedent and spouse in joint tenancy with the right of survivorship, only half of the value of the property is included in the decedent's gross estate.

Question 18

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

Accepted Answer

Only transfers of qualifying interests, such as a life estate, will qualify for the marital deduction. Terminable interests, such as a term of years, do not qualify unless certain conditions are met.

Question 19

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

Only the unused portion of the applicable credit can be applied against the gift tax.

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 value of realty owned in joint tenancy to be included in the gross estate depends on the amount contributed by each owner toward the purchase of the property.

Quiz 14: Transfer Taxes and Wealth Planning

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

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

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.

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.

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.

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

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 tenants in common or as joint tenants with the right of survivorship.

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.

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.

Both spouses must consent to any gift-splitting election.

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

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

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

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

No deductions are allowed when calculating the taxable estate.

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

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.

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

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

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.