Question 1

Identify which of the following statements is true.

Accepted Answer

A taxable gift occurs when property is transferred for less than its fair market value (FMV), but an arm's length transaction implies that the transfer occurred at FMV. Therefore, choice A is false. Choice C is also false because the statutory exemption for payments of medical care does not require that the payment be made for a relative; it only requires that the payment be made directly to the medical care provider. Choice B is true because underestimating the property's FMV can lead to a gift of the difference between the sales price and the FMV, which can be subject to gift tax.

Question 2

A qualified disclaimer must be made within nine months after (a)the day the property is transferred, or (b)the day the person receiving the property becomes age 21, whichever is later.

Accepted Answer

A qualified disclaimer must be made within nine months after the property is transferred or the day the person receiving the property becomes age 21, whichever is later, as stated in the statement.

Question 3

In November 1976, Grant uses $30,000 of the specific exemption available at that time.The unified credit available to Grant for post-1976 transfers is reduced by

Accepted Answer

B) $30,000 × 0.20 = $6,000

Question 4

Barbara sells a house with an FMV of $170,000 to her daughter for $120,000.From this transaction, Barbara is deemed to have made a gift (before the annual exclusion)of

Accepted Answer

A) $170,000 - $120,000 = $50,000

Question 5

The purchase of a $15,000 engagement ring generates a taxable gift necessitating the filing of a gift tax return.

Accepted Answer

The current annual gift tax exclusion limit is $15,000 per recipient, so a $15,000 engagement ring would exceed this limit and generate a taxable gift. As a result, the giver would need to file a gift tax return with the IRS.

Question 6

Phil transfers $50,000 to a revocable trust benefiting his son, Josh.The transfer is a taxable gift.

Accepted Answer

Since Phil can revoke the trust and take back the assets, for tax purposes, he has not made a completed gift. Therefore, it is not considered a taxable gift.

Question 7

The annual exclusion permits donors to make gifts of $14,000 each to multiple donees.

Accepted Answer

This is true. The annual exclusion for 2021 allows donors to make gifts of up to $14,000 to as many individuals as they wish without triggering gift tax consequences or reducing their lifetime gift and estate tax exemptions.

Question 8

In 1998, Delores made taxable gifts to her son of property with an FMV of $200,000.In the current year when Delores dies, the property is worth $800,000.The amount included in Delores's estate tax base because of the 1998 gift is

Accepted Answer

The taxable gifts made by Delores during her lifetime are added to determine her estate tax base. Therefore, the amount included in Delores's estate tax base because of the 1998 gift is the full FMV of the property at the time of the gift, which is $200,000. The current FMV of the property at the time of Delores's death is not relevant for determining the estate tax base for this gift.

Question 9

Molly sells her car, valued at $30,000, to her nephew Todd for $18,000.Molly has made a taxable gift.

Accepted Answer

The difference between the fair market value of the car ($30,000) and the amount Molly sold it for ($18,000) is $12,000, which constitutes a taxable gift.

Question 10

Mike transfers securities to an irrevocable trust and gives Rachel the power to determine who will receive the trust's income and assets.Rachel, her estate, and her creditors cannot be beneficiaries or receive the trust assets.Rachel has a general power of appointment.

Accepted Answer

Rachel does not have a general power of appointment because she, her estate, and her creditors cannot benefit from the trust's assets. A general power of appointment allows the holder to appoint the property to themselves, their estate, their creditors, or any other person.

Question 11

In the current year, Bonnie, who is single, sells stock valued at $60,000 to Linda for $15,000.Later that year, Bonnie gives Linda $25,000 in cash.Bonnie's taxable gifts from these transfers total

Accepted Answer

C)
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Question 12

The changing of a life insurance policy beneficiary from a spouse to an adult daughter constitutes a gift for transfer tax purposes.

Accepted Answer

Changing a beneficiary on a life insurance policy does not constitute a gift for transfer tax purposes because the change in beneficiary does not transfer any present interest or economic benefit to the new beneficiary until the death of the insured.

Question 13

In the current year, Cesar, who is single, gives $26,000 to each of his 20 nieces and nephews for a total property transfer of $520,000.Cesar's taxable gifts total

Accepted Answer

D)
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Question 14

A net gift occurs when a donor makes a gift subject to the agreement that the recipient agrees to pay the gift tax.

Accepted Answer

A net gift is one in which the donor agrees to pay the gift tax on behalf of the recipient. Therefore, the statement is true.

Question 15

The gift tax is a wealth transfer tax that applies to transfers during a person's lifetime and transfers at death.

Accepted Answer

The gift tax applies only to transfers made during a person's lifetime. The estate tax applies to transfers at death.

Question 16

Identify which of the following statements is true.

Accepted Answer

The statement that is true is that under the unified transfer tax system, taxable gifts made after 1976 are included in the donor's death tax base. The gift tax is a wealth transfer tax that applies only to transfers during a person's lifetime, not at death. The gift tax is part of the unified transfer tax system.

Question 17

Identify which of the following statements is true.

Accepted Answer

The answer of Identify which of the following statements is...

Question 18

Mia makes a taxable gift when she makes her mother a joint owner on Mia's bank account.Mia has $25,000 in the account.

Accepted Answer

The answer of Mia makes a taxable gift when she...

Question 19

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

Accepted Answer

Gift tax returns are filed on a calendar-year basis, meaning that they cover a tax year from January 1 to December 31.

Question 20

A "Crummey demand power" in a trust document allows the donor to demand a distribution from the trust in years in which earnings exist within the trust.

Accepted Answer

A "Crummey demand power" actually gives the beneficiaries, not the donor, the right to withdraw contributions made to the trust for a limited period of time, typically 30 or 60 days after the contribution is made. This feature is used to qualify gifts for the annual gift tax exclusion.

Quiz 12: The Gift Tax

Identify which of the following statements is true.

A qualified disclaimer must be made within nine months after (a)the day the property is transferred, or (b)the day the person receiving the property becomes age 21, whichever is later.

In November 1976, Grant uses $30,000 of the specific exemption available at that time.The unified credit available to Grant for post-1976 transfers is reduced by

Barbara sells a house with an FMV of $170,000 to her daughter for $120,000.From this transaction, Barbara is deemed to have made a gift (before the annual exclusion) of

The purchase of a $15,000 engagement ring generates a taxable gift necessitating the filing of a gift tax return.

Phil transfers $50,000 to a revocable trust benefiting his son, Josh.The transfer is a taxable gift.

The annual exclusion permits donors to make gifts of $14,000 each to multiple donees.

In 1998, Delores made taxable gifts to her son of property with an FMV of $200,000.In the current year when Delores dies, the property is worth $800,000.The amount included in Delores's estate tax base because of the 1998 gift is

Molly sells her car, valued at $30,000, to her nephew Todd for $18,000.Molly has made a taxable gift.

Mike transfers securities to an irrevocable trust and gives Rachel the power to determine who will receive the trust's income and assets.Rachel, her estate, and her creditors cannot be beneficiaries or receive the trust assets.Rachel has a general power of appointment.

In the current year, Bonnie, who is single, sells stock valued at $60,000 to Linda for $15,000.Later that year, Bonnie gives Linda $25,000 in cash.Bonnie's taxable gifts from these transfers total

The changing of a life insurance policy beneficiary from a spouse to an adult daughter constitutes a gift for transfer tax purposes.

In the current year, Cesar, who is single, gives $26,000 to each of his 20 nieces and nephews for a total property transfer of $520,000.Cesar's taxable gifts total

A net gift occurs when a donor makes a gift subject to the agreement that the recipient agrees to pay the gift tax.

The gift tax is a wealth transfer tax that applies to transfers during a person's lifetime and transfers at death.

Identify which of the following statements is true.

Identify which of the following statements is true.

Mia makes a taxable gift when she makes her mother a joint owner on Mia's bank account.Mia has $25,000 in the account.

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

A "Crummey demand power" in a trust document allows the donor to demand a distribution from the trust in years in which earnings exist within the trust.