Question 1

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 2

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 3

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 4

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

Accepted Answer

The gross estate includes all property that the deceased person owned or had an interest in at the time of their death, whether or not it passes through probate. This can include property such as jointly-owned assets, certain types of trusts, and life insurance policies with a named beneficiary.

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 the benefits of the property currently, such as receiving income payments or using the property itself.

Question 6

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

Accepted Answer

A terminable interest is an interest that will terminate at some point in the future, such as upon the death of the recipient spouse or a specific date. Because the interest is terminable, it does not qualify for the unlimited marital deduction, which allows for the tax-free transfer of assets between spouses.

Question 7

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

Question 8

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 value of half of real property owned by a decedent and spouse in joint tenancy with the right of survivorship is included in the decedent's gross estate for estate tax purposes. This is because the surviving spouse automatically becomes the sole owner of the property upon the decedent's death, which is considered a transfer subject to estate tax.

Question 9

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 a life insurance policy paid to the decedent's estate are included in the decedent's gross estate for estate tax purposes, regardless of whether the decedent had ownership rights in the policy or not.

Question 10

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 11

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

Accepted Answer

Debts of the decedent are deductible in calculating the taxable estate. This is because they reduce the value of the estate that is subject to estate tax. However, not all debts are deductible, and there are certain rules and limitations that apply.

Question 12

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 13

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 14

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 15

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.

Question 16

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 17

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 18

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 19

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 known as the "incidents of ownership" rule, meaning that if the decedent had any control or influence over the policy, such as the right to change beneficiaries or borrow against the policy, the proceeds will be included in their gross estate for tax purposes.

Question 20

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.

Quiz 25: Transfer Taxes and Wealth Planning