Question 1

Madison was married at the time of her death and her gross estate consisted of $22 million in stock and bonds. Madison left all of her property to her spouse. What is the result?

Accepted Answer

To avoid taxing a married couple's estate twice, Congress provides a deduction for bequests to a surviving spouse. To qualify for the marital deduction, the transferred property must be included in the estate of the deceased spouse, and the surviving spouse must receive the property from the decedent and control its ultimate disposition.

Question 2

At her death Serena owned real estate worth $210,000 with her spouse in joint tenancy with the right of survivorship. Serena contributed $50,000 to the original cost of the property and her spouse contributed the remaining $100,000. What amount, if any, is included in Serena's gross estate?

Accepted Answer

For married co-owners, half of the value of property owned in joint tenancy with the right of survivorship is included in the decedent's gross estate. The marital deduction would only offset the gross estate in calculating the taxable estate.

Question 3

Which of the following is a True statement?

Accepted Answer

Definition of a bypass plan.

Question 4

Which of the following is a True statement?

Accepted Answer

This is the definition of a serial gift.

Question 5

Christopher's residence was damaged by a storm during the administration of his estate. Christopher's executor paid $120,000 to repair the residence after the storm. Which of the following is a True statement?

Accepted Answer

Casualty and theft losses are deductible for calculating the estate tax without any floor limitation. These losses must be incurred during the administration of the estate, otherwise any deduction belongs to the new owner of the property. Only casualty losses on business property is allowed for income tax purposes starting in 2018.

Question 6

An applicable credit is subtracted in calculating both the gift tax and the estate tax. Why doesn't this calculation have the effect of increasing the total applicable credit amount?

Accepted Answer

The tentative estate tax is reduced by only taxes payable on adjusted taxable gifts rather than gross gift taxes. If the gross gift taxes were used as a credit against the estate tax, then the effect would be to increase the applicable credit by the credit previously used in calculating the gift tax.

Question 7

Harold and Mary are married and live in a community property state. During the marriage Harold bought a parcel of real estate for $100,000 in community funds and titled the property in his name alone. Mary died on January 30ᵗʰ of this year and was survived by Harold who did not remarry. The parcel of real property was worth $250,000 on January 30ᵗʰ of this year but was only worth $220,000 at year end. What amount, if any, is included in Mary's gross estate?

Accepted Answer

Half of the value of community property on the date of death is included in a spouse's gross estate.

Question 8

Adjusted taxable gifts are added to the taxable estate to accomplish which of the following objectives?

Accepted Answer

The objective of adding previously taxed transfers to the taxable estate is to allow the estate tax base to reflect all transfers, both intervivos and testamentary. Under a progressive tax rate schedule, this adjustment is designed to increase the marginal tax rate on the estate. Adjusted taxable gifts themselves, however, are not subject to tax in the estate formula. To prevent double taxation of prior taxable gifts, we reduce the tentative estate tax by a credit for the taxes that would have been payable on the adjusted taxable gifts under the current tax rate schedule. Thus, although prior gifts have a direct effect on the magnitude of the estate tax, the estate tax is imposed only on the transfers included in the taxable estate under the current rate schedule.

Question 9

This year Alex's friend, Kimberly, was disabled. Alex paid $30,000 to Kimberly's doctor for medical expenses. In addition, Alex also paid $25,000 to Kimberly directly so that her son could afford tuition at State University this year. Has Alex made taxable gifts, and if so, in what amounts?

Accepted Answer

The answer of This year Alex's friend, Kimberly, was disabled....

Question 10

Tracey is unmarried and owns $17 million in stock and bonds. What is the result if Tracey dies this year and leaves all of her property to a qualified charity?

Accepted Answer

Tracey's gross estate ($17 million) is reduced by charitable contributions to zero.

Question 11

At her death Emily owned real estate worth $2.5 million and other property worth $10 million. Property taxes of $200,000 were accrued on the real estate at the time of Emily's death. Which of the following is a True statement with respect to these items without considering any other owned property?

Accepted Answer

Debts of the estate, such as mortgages and accrued taxes, are deductible in calculating the adjusted gross estate.

Question 12

Andrea transferred $500,000 of stock to a trust, with income to be paid to her niece for 20 years (value $125,000) and the remainder to her nephew (value $375,000). Andrea named a bank as independent trustee but retained the power to determine how much income, if any, will be paid in any particular year. What is the amount of the taxable gift, if any? Explain your answer.

Accepted Answer

The answer of Andrea transferred $500,000 of stock to a...

Question 13

Chloe's gross estate consists of the following property valued at the date of death: 
Chloe's real estate is encumbered by a mortgage of $450,000, and Chloe's executor paid her funeral costs of $6,000 and charged fees for $24,000. Which of the following is a True statement?

Accepted Answer

Chloe's gross estate ($12.5 million) is reduced by debts, funeral expenses, and executor's fees (if elected by the executor). Hence the adjusted gross estate is $12,020,000 ($12.5 million less $480,000).

Question 14

The generation-skipping tax is designed to accomplish which of the following?

Accepted Answer

The GST merely plugs a hole in the transfer tax system.

Question 15

Which of the following is a True statement?

Accepted Answer

Definitions of fiduciaries.

Question 16

At his death Jose owned real estate worth $22 million but subject to a mortgage of $7 million. Which of the following is a True statement?

Accepted Answer

Debts of the estate, such as mortgages and accrued taxes, are deductible in calculating the adjusted gross estate.

Question 17

The executor of Isabella's estate incurred administration expenses of $32,000 and paid $5,000 in funeral expenses. The executor charged the estate for $24,000 in fees. What is the maximum amount Isabella's estate can deduct in computing the adjusted gross estate?

Accepted Answer

Debts of the estate, such as mortgages and accrued taxes, are deductible in calculating the adjusted gross estate. Expenses incurred in administering the estate are also deductible, such as executor's fees, attorneys' fees. The executor has the option of deducting administration expenses (but not funeral expenses) and casualty and theft losses on the estate tax return or on the estate's income tax return. ($32,000 + $5,000 + $24,000)

Question 18

Which of the following is a True statement?

Accepted Answer

Expenses incurred in administering the estate are also deductible, such as executor's fees, attorneys' fees. Funeral expenses are deductible, including any reasonable expenditure allowed under local law. The executor has the option of deducting administration expenses (but not funeral expenses) and casualty and theft losses on the estate tax return or on the estate's income tax return.

Question 19

Which of the following is a True statement?

Accepted Answer

At the end of a terminable interest, the property will pass to the person holding the remainder interest. Hence, the value of the remainder depends upon the length of the terminable interest (life estate here) and the Section 7520 interest rate.

Question 20

Ethan owned a vacation home at the time of his death. Which of the following is a True statement if Ethan was married to Emma and resided in a common law state at the time of his death?

Accepted Answer

Property rights that are terminable do not generally qualify for the marital deduction.

Quiz 14: Transfer Taxes and Wealth Planning

Madison was married at the time of her death and her gross estate consisted of $22 million in stock and bonds. Madison left all of her property to her spouse. What is the result?

At her death Serena owned real estate worth $210,000 with her spouse in joint tenancy with the right of survivorship. Serena contributed $50,000 to the original cost of the property and her spouse contributed the remaining $100,000. What amount, if any, is included in Serena's gross estate?

Which of the following is a True statement?

Which of the following is a True statement?

Christopher's residence was damaged by a storm during the administration of his estate. Christopher's executor paid $120,000 to repair the residence after the storm. Which of the following is a True statement?

An applicable credit is subtracted in calculating both the gift tax and the estate tax. Why doesn't this calculation have the effect of increasing the total applicable credit amount?

Adjusted taxable gifts are added to the taxable estate to accomplish which of the following objectives?

This year Alex's friend, Kimberly, was disabled. Alex paid $30,000 to Kimberly's doctor for medical expenses. In addition, Alex also paid $25,000 to Kimberly directly so that her son could afford tuition at State University this year. Has Alex made taxable gifts, and if so, in what amounts?

Tracey is unmarried and owns $17 million in stock and bonds. What is the result if Tracey dies this year and leaves all of her property to a qualified charity?

At her death Emily owned real estate worth $2.5 million and other property worth $10 million. Property taxes of $200,000 were accrued on the real estate at the time of Emily's death. Which of the following is a True statement with respect to these items without considering any other owned property?

Chloe's gross estate consists of the following property valued at the date of death: Chloe's real estate is encumbered by a mortgage of $450,000, and Chloe's executor paid her funeral costs of $6,000 and charged fees for $24,000. Which of the following is a True statement?

The generation-skipping tax is designed to accomplish which of the following?

Which of the following is a True statement?

At his death Jose owned real estate worth $22 million but subject to a mortgage of $7 million. Which of the following is a True statement?

The executor of Isabella's estate incurred administration expenses of $32,000 and paid $5,000 in funeral expenses. The executor charged the estate for $24,000 in fees. What is the maximum amount Isabella's estate can deduct in computing the adjusted gross estate?

Which of the following is a True statement?

Which of the following is a True statement?

Ethan owned a vacation home at the time of his death. Which of the following is a True statement if Ethan was married to Emma and resided in a common law state at the time of his death?