Deck 17: The Federal Gift and Estate Taxes

Question 1

Candice and Richard are husband and wife and have always lived in Pennsylvania, not a community property state.In 1981, using joint funds, they purchased an insurance policy (maturity value of $600,000) on Richard's life.Their son, Jacob, was designated as the beneficiary.In 2009, and at a time when the policy has a replacement cost of $60,000, Richard dies.As to the $600,000 insurance proceeds paid to Jacob,

A)$300,000 is included in Richard's gross estate, and Candice makes a gift of $300,000.
B)$600,000 is included in Richard's gross estate.
C)Candice makes a gift of $600,000.
D)$60,000 is included in Richard's gross estate.
E)None of the above

Answer 1

A

Question 2

Pursuant to Jake's will, Kassandra (Jake's sister) inherits property.Six years later Kassandra dies.Federal estate tax attribu?table to the inclusion of the property in Jake 's gross estate was $90,000.The estate tax attributable to the inclusion of the property in Kassandra's gross estate is $120,000.Kassandra's credit for tax on prior transfers is:

A)$54,000.
B)$76,500.
C)$96,000.
D)$120,000.
E)None of the above.

Answer 2

A

Question 3

At the time his death, Bradley owned stock as follows. $\begin{array}{lll}&\begin{array}{l}\text { Date of Death } \\\text { Value }\end{array} & \begin{array}{l}\text { Value Six } \\\text { Months Later }\end{array} \\\hline\text { Stock in Valley Corporation } & \$ 525,000 & \$ 475,000 \\\text { Stock in Stream Corporation } & 250,000 & 275,000\end{array}$ The executor sells the Valley Corporation stock seven months after Bradley's death for $500,000.The executor sells the Stream stock four months after Bradley's death for $265,000.If the alternate valuation date is properly elected, the value of Bradley's estate as to these stocks is:

A)$775,000.
B)$765,000.
C)$740,000.
D)$725,000.
E)None of the above.

Answer 3

$740,000.

Question 4

Pursuant to Joshua's will, Penny (Joshua's sister) inherits property.Four years later Penny dies.Federal estate tax attribu?table to the inclusion of the property in Joshua's gross estate was $90,000.The estate tax attributable to the inclusion of the property in Penny 's gross estate is $60,000.Penny 's credit for tax on prior transfers is:

A)$48,000.
B)$60,000.
C)$72,000.
D)$90,000.
E)None of the above.

Question 5

Faye made taxable gifts of cash equal to $350,000 in 1975, $450,000 in 1978, and $150,000 early in 1998.Faye dies late in 2009 leaving a taxable estate of $700,000.In applying the unified tax rate schedules (for estate tax purposes), the executor must first determine the tax on:

A)$700,000.
B)$850,000.
C)$1,300,000.
D)$1,650,000.
E)None of the above.

Question 6

Donald and Antonia are husband and wife and have always resided in New York, not a community property state.In 1981, they purchase land as tenants by the entirety for $600,000 with Donald providing $400,000 and Antonia the balance of $200,000.In 2009, Antonia dies, Donald surviving, when the real estate is worth $800,000.As to this property, Antonia's gross estate includes:

A)$0.
B)$200,000.
C)$300,000.
D)$400,000.
E)None of the above.

Question 7

At the time of her death, Janice owned stock as follows. $\begin{array}{lll}&\begin{array}{l}\text { Date of Death } \\\text { Value }\end{array} & \begin{array}{l}\text { Value Six } \\\text { Months Later }\end{array} \\\hline\text { Stock in Peak Corporation } & \$ 350,000 & \$ 280,000 \\\text { Stock in Meadow Corporation } & 200,000 & 180,000\end{array}$ The executor sells the Peak Corporation stock seven months after Janice's death for $250,000.The executor sells the Meadow stock four months after Janice's death for $150,000.If the alternate valuation date is properly elected, the value of Janice's estate as to these stocks is:

A)$550,000.
B)$480,000.
C)$460,000.
D)$430,000.
E)None of the above.

Question 8

Jordan made taxable gifts of cash equal to $350,000 in 1975, $200,000 in 1978, and $150,000 early in 1998.Jordan dies late in 2009 leaving a taxable estate of $300,000.In applying the unified tax rate schedules (for estate tax purposes), the executor must first determine the tax on:

A)$300,000.
B)$600,000.
C)$650,000.
D)$1,000,000.
E)None of the above.

Question 9

George and Nancy are husband and wife and live in Arizona.In 1988, they purchased a commercial annuity for $300,000 using community funds.Under the terms of the contract, $3,750 a month is payable to them for George's life.If George predeceases Nancy, $3,300 a month is payable to Nancy.George dies in 2009 when the replacement value of Nancy's annuity is $150,000.As to the annuity, George's estate includes:

A)$0.
B)$50,000.
C)$75,000.
D)$150,000.
E)None of the above.

Question 10

In 1986, Ricky and Kassandra (father and daughter) acquire real estate listing title as: "Ricky and Kassandra, joint tenants with the right of survivorship." Of the $200,000 purchase price, $60,000 was furnished by Ricky and $140,000 by Kassandra.The $140,000 Kassandra provided had been received by her as an inheritance from her mother.In 2009, Kassandra predeceases Ricky at a time when the property is worth $500,000.As to this property, Kassandra's gross estate includes:

A)$350,000.
B)$250,000.
C)$200,000.
D)$150,000.
E)None of the above.