Question 1

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.
Casualty and theft losses are deductible without any floor limitation.

Accepted Answer

The statement is false. The theft of property included in the gross estate is deductible in calculating the taxable estate without any floor limitation, while casualty and theft losses incurred during the decedent's lifetime are subject to a floor limitation of 10 percent of the adjusted gross income.

Question 2

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

Accepted Answer

The unified credit is a lifetime credit that reduces the amount of gift or estate tax owed. If any portion of the unified credit has been used in prior years, it reduces the remaining credit available for future gifts or estate taxes.

Question 3

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 4

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 5

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 6

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 7

The probate estate consists of all property owned by the decedent that is excluded from the gross estate.
The gross estate consists of the probate estate plus the value of certain automatic property transfers that take effect at death.

Accepted Answer

The statement is incorrect. The gross estate consists of the probate estate plus the value of all property owned by the decedent at the time of their death, including property subject to automatic transfers.

Question 8

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

Accepted Answer

This is a correct statement regarding present interest.

Question 9

A gift tax return does not need to be filed unless the taxpayer has made current gifts in excess of the unified credit.
A gift tax return must be filed if aggregate gifts to at least one recipient exceeds the annual exclusion for the year.

Accepted Answer

This statement is incorrect. A gift tax return must be filed if aggregate gifts to at least one recipient exceeds the annual exclusion for the year, regardless of whether or not the taxpayer has exceeded the unified credit.

Question 10

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 deducted from the gross estate to determine the taxable estate.

Question 11

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 12

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 13

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 14

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

Accepted Answer

A terminable interest is an interest in property that will terminate or fail upon the occurrence of a certain event, such as the death of the recipient spouse. Because the interest is not unlimited and may not ultimately pass to the surviving spouse, it does not qualify for the marital deduction.

Question 15

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

Accepted Answer

The gross estate includes all property, both probate and non-probate, owned by the decedent at the time of death. Therefore, there may be property transfers that are not included in the probate estate but are still part of the gross estate.

Question 16

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 decedent and spouse own real property in joint tenancy with the right of survivorship, the full value of the property is included in the gross estate of the decedent. This means that half of the value of the property will be subject to estate tax upon the decedent's death.

Question 17

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 accurately describes the definition of fair market value, which is used to determine the value of property included in an individual's gross estate for estate tax purposes.

Question 18

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 cause the gifts to be taxed twice. The gift tax is a separate tax from the estate tax, and the inclusion of gifts in the taxable estate simply increases the amount subject to estate tax. However, there are certain circumstances where gift tax paid on gifts made within three years of death may be included in the taxable estate for estate tax purposes, which could result in some overlap of taxation.

Question 19

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

The proceeds of life insurance paid to the decedent's estate are included in the decedent's gross estate for estate tax purposes, regardless of whether the decedent had any ownership rights in the policy at the time of death. This is because the proceeds are considered to be part of the decedent's overall assets at the time of death.

Question 20

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

If the decedent had the right to designate the beneficiary of the policy, the proceeds are considered part of the decedent's estate for estate tax purposes.

Quiz 14: Transfer Taxes and Wealth Planning

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. Casualty and theft losses are deductible without any floor limitation.