Deck 14: Estate and Gift Taxation

Question 1

Even if a transfer is deemed complete for Federal gift tax purposes, the transfer may be incomplete for Federal estate tax purposes, with the result that the value of the transferred assets will be included in the transferor's gross estate.

Answer 1

True

Question 2

If individual A performs legal services for his daughter, the fair market value of the services is subject to Federal gift tax.

Answer 2

False

Question 3

The probate estate consists of all property interests legally owned by the decedent at death.

Answer 3

False

Question 4

Which of the following is not a true statement concerning joint tenancy with right of survivorship (JTWROS)?

A)Each tenant owns the same fractional share in the property.
B)Joint tenants have the right to sever their interests in the property.
C)Upon the death of one joint tenant, property passes to the surviving tenants unless the decedent's will directs a different disposition.
D)None of the above

Question 5

An estate that consists primarily of the assets of a closely held business may defer payment of its estate tax liability attributable to that business for up to 20 years.

Question 6

During the current year, taxpayer U gives a gift of $300,000 cash to her grandson L.This is the first substantial gift she has given any grandchild.Because the gift is a generation-skipping transfer, U must pay a generation-skipping transfer tax.

Question 7

For Federal gift tax purposes, when a transfer is made to an irrevocable trust, the transfer is considered a gift to the beneficiaries of the trust and not to the trustee or the trust itself.

Question 8

The Federal estate and gift taxes do not represent a major source of revenue for the Federal government.

Question 9

In common law systems, married individuals own an equal, undivided interest in all wealth acquired during the course of the marriage, regardless of which spouse made any individual contribution to the marital wealth.

Question 10

H and W are married.This year H died with a modest estate.As a result, a portion of his unified credit was not used.The unused portion can be assigned to his surviving spouse, W, assuming an estate tax return is filed for H and the executor makes the proper election.

Question 11

An executor may elect the alternate valuation date of six months after date of death for any one or more of the assets included in the gross estate.

Question 12

Upon the death of a resident of a community property state, only half of the value of any assets owned as community property are included in the decedent's gross estate.

Question 13

Which of the following is not a true statement concerning community property systems?

A)Assets acquired by either of two people before they are married generally become community property upon their marriage
B)Assets purchased by either spouse in the course of marriage are community property
C)Assets inherited by one spouse in the course of a marriage generally are not community property
D)None of the above

Question 14

In 1978, X created an irrevocable trust.The trust income is paid annually to whichever of his children X designates.The trust will terminate when X's youngest child reaches age 25, at which time all trust assets will pass to the children in equal shares.X dies while the trust was still in existence.The date-of-death value of the trust assets will be includible in X's gross estate.

Question 15

An estate includes certain farmland that has a market value of $5,000,000.If the estate is eligible to elect special-use valuation under § 2032A, the land may be valued at its business-usage value of only $2,000,000.

Question 16

In 1980, T bought 100 shares of X Corporation stock with her own funds and had the shares registered in her name and that of her grandson G as joint tenants with right of survivorship.T died in the current year.Only half of the value of the 100 shares of X stock is included in T's gross estate for Federal estate tax purposes.

Question 17

The transfer of municipal bonds, the income from which is not subject to income tax, is subject to the Federal gift tax.

Question 18

Donative intent on the part of the donor must be present in order for a transfer to be classified as a "gift" subject to the Federal gift tax.

Question 19

During the year, D transfers title to certain investment real estate to her close friends E and F.E is given a life estate in the property and F is given the remainder interest.If the value of the real estate is $200,000 at date of gift, the amount of the taxable gift made by D is $187,000.

Question 20

The value of social security death benefits paid to the survivors on the death of an individual is not includible in the individual's gross estate.

Question 21

The property of a person who dies intestate is generally

A)Distributed only to the surviving spouse and the state of residence and is not subject to the Federal estate tax
B)Distributed according to the laws of the state of residence and is subject to the Federal estate tax
C)Seized by the state of residence and is subject to the Federal estate tax
D)Distributed according to Federal law and is subject to the Federal estate tax

Question 22

In the current year, individual B gave some antique jewelry valued at $600,000 to her son, and paid a gift tax of $13,000 on the transfer.At the date of B's death just eighteen months later, the jewelry was worth $725,000.Based on these facts, the amount includible in B's gross estate attributable to the gift of the jewelry is

A)$0
B)$13,000
C)$613,000
D)$738,000

Question 23

Which of the following is not includible in the gross estate of decedent D?

A)$600,000 life insurance proceeds payable on D's death to his estate
B)Real estate owned by D located in Mexico
C)Trust assets worth $1 million over which D held a specific power of appointment at his death
D)Assets worth $100,000 owned by D at death that are distributed to D's surviving spouse in settlement of her legal claim to a portion of D's estate

Question 24

D, a single taxpayer, made the following cash gifts in 2012: To qualified charity A $\quad$ $\$ 18,000$
To minor child C $\quad$ 27,000
To political party $\mathrm { P } \quad 12,000$
To friend $F \quad 7,000$ After application of the annual exclusion, what is the total amount of taxable gifts made by D?

A)$12,000
B)$14,000
C)$16,000
D)$22,000

Question 25

Which of the following actions in the current year completed a taxable gift during donor K's lifetime but did not remove the transferred assets from K's gross estate?

A)K transferred assets into a revocable trust for the sole benefit of her daughter W.
B)K transferred assets into an irrevocable trust for the sole benefit of her brothers X and Y.K retained the right to decide what proportion of the annual income each brother would receive; however, K retained no control over the ultimate distribution of the trust corpus to X and Y.
C)K amended a revocable trust created in 1982 for the sole benefit of her son Z to make the trust irrevocable; K retained no control over the assets of the trust.
D)None of the above

Question 26

In 1980, W used her own funds to purchase a $100,000 paid-up life insurance policy on the life of her husband H.W retained ownership of the policy and designated her oldest daughter D as sole beneficiary.The cost of the policy was $60,000.Assume wife W rather than husband H died in the current year.At date of death, the policy had a replacement cost of $72,000.What amount attributable to the life insurance policy is includible in W's gross estate for Federal estate tax purposes?

A)$0
B)$50,000
C)$72,000
D)$100,000

Question 27

Wife P and husband Q own real estate worth $75,000 as joint tenants with right of survivorship.P contributed $20,000 and Q contributed $30,000 of the original $50,000 purchase price of the property.Q died in the current year; P survives him.The value of the property to be included in the gross estate of Q is

A)$0
B)$30,000
C)$37,500
D)$50,000

Question 28

On January 1, 2003, S transferred $500,000 of securities into a revocable trust for the sole benefit of her brother U.On January 1, 2012, S amends the trust instrument to make the trust irrevocable.S retains no control over the trust assets.On January 1, 2012, the trust assets have a fair market value of $430,000.Based on these facts,

A)S has made no taxable gift.
B)S made a $500,000 gift on January 1, 2003.
C)S made a $500,000 gift on January 1, 2012.
D)S made a $430,000 gift on January 1, 2012.

Question 29

Taxpayer T made a taxable gift of $90,000 to one individual in the current year.The gift tax liability before credit is $21,000.T had not made any gift in excess of the annual exclusion before this year.T

A)Must apply $21,000 of the unified tax credit to this year's gift
B)May elect to apply either $21,000 or nothing of the unified tax credit to this year's gift
C)May elect to apply any amount between $0 and $21,000, inclusive, of the unified tax credit to this year's gift
D)Must not apply any portion of the unified tax credit before making a cumulative total of $1,000,000 in taxable gifts beyond those covered by annual exclusions

Question 30

In 2012 X made the following cash transfers: To wife $\mathrm { W } \quad\quad \$ 90,000$
To son $\mathrm { M } \quad\quad 30,000$
To daughter $\mathrm { N } \quad\quad 8,000$
To irrevocable trust for grandchild O $\quad200,000$ Under the terms of the trust, all accumulated income and the trust assets will be distributed to O on her 23rd birthday.Based on these facts, if X and M elect gift splitting, X's taxable gifts total

A)$80,000
B)$93,000
C)$102,000
D)$89,000
E)None of the above

Question 31

In 1975, brothers Q and R purchased a tract of real property as joint tenants with right of survivorship.Q contributed $5,000 toward the $20,000 purchase price and R contributed the remaining $15,000.When R died in the current year, his will provided that all of his wealth would pass to his daughter D.The date-of-death value of the real property was $100,000.The value of R's interest in the real property includible in his gross estate is

A)$0
B)$50,000
C)$75,000
D)$100,000

Question 32

B owns a life estate in certain property and has a power of appointment over the property.B's gross estate will not include the value of the property if the appointments of property she may make to herself are limited by the trust instrument to the sole purpose of her

A)Support
B)Happiness
C)Comfort
D)Well-being

Question 33

During 2012, Mr.and Mrs.Z decide to begin a program of inter vivos giving to their children, their children's spouses, and their grandchildren.The couple has one married daughter, one married son, and six minor grandchildren.What is the maximum total amount that Mr.and Mrs.Z may give to those mentioned in 2011 without incurring the Federal gift tax?

A)$104,000
B)$130,000
C)$192,000
D)Some other amount.

Question 34

Which of the following property interests cannot be transferred under the will of the holder of the interest?

A)Life estate
B)Remainder interest
C)Reversionary interest
D)All of the above

Question 35

On May 6 of the current year, S gifted 10 shares of publicly traded common stock to G.On that date, the highest selling price of the stock was $60 per share, the lowest selling price was $58 per share, and the closing price was $59.50 per share.What is the value of the 10 shares for gift tax purposes?

A)$600
B)$595
C)$580
D)$590

Question 36

Decedent Z had been an employee of Acme Corporation for 30 years prior to his death and a participant in Acme's qualified profit-sharing plan.Under the terms of the plan, Z's children are to receive the monthly annuity to which Z would have been entitled if he had lived until retirement.The current year cost of a comparable annuity is $180,000.Based on these facts, the amount includible in Z's gross estate attributable to the annuity is

A)$0
B)$80,000
C)$100,000
D)$180,000

Question 37

W, a single taxpayer, made her first taxable gift (after application of the annual exclusion) of $100,000 in 1989.In the current year, she made her second taxable gift of $6,000,000.What is the gift tax payable by W in the current year?

A)$0
B)$343,000
C)$319,200
D)$2,090,000

Question 38

Under what circumstances may an executor elect an alternative valuation date of six months after death rather than the date of death itself?

A)The resulting value of the gross estate and the Federal estate tax imposed both increase.
B)The resulting value of the gross estate and the Federal estate tax imposed both decrease.
C)The resulting value of the gross estate increases.
D)None of the above

Question 39

In 1980, W used her own funds to purchase a $100,000 paid-up life insurance policy on the life of her husband H.W retained ownership of the policy and designated her oldest daughter D as sole beneficiary.The cost of the policy was $60,000.Husband H died during the current year.At date of death, the policy had a replacement cost of $72,000.What amount attributable to the life insurance policy is includible in H's gross estate for Federal estate tax purposes?

A)$0
B)$50,000
C)$72,000
D)$100,000

Question 40

In 1960, Grandfather GF created a trust with a corpus of marketable securities worth $1 million.Under the terms of the trust instrument, GF's daughter D will receive the income from the trust as long as she lives.Upon D's death, the securities in the trust will be distributed to D's two children.Upon D's death in the current year, the securities had a market value of $5 million and were generating an average annual income to D of $400,000.Based on these facts, the amount includible in D's gross estate attributable to her interest in the trust is

A)$0
B)$400,000
C)$1,000,000
D)$5,000,000

Question 41

Grandmother G transferred assets in trust, the life interest payable to her daughter D, with the trust assets passing to her only grandchild GC upon D's death.If D dies in the current year, and the value of the property in trust of the time of her death is $5 million, what is the amount of the generation-skipping transfer tax imposed on the transfer?

A)$0
B)$500,000
C)$550,000
D)$1 million

Question 42

Decedent M left a gross estate of $10 million.M's will instructed that after all his debts and expenses were paid, his estate be distributed as follows: To M's church $\quad\quad\$ 1,000,000$
To M's sister $\quad\quad 500,000$
To M's best friend $\quad\quad 300,000$
And residual (remaining estate) to M's widow Based on these facts, M's taxable estate is

A)$0
B)$800,000
C)$1,800,000
D)$9 million

Question 43

Individual D transferred his shares in XYZ Corporation to his son E in exchange for $500,000.The market value of the shares on the date of the transfer was $1 million.At D's death the value of the stock, then $3 million, was includible in his gross estate.By what amount may D's estate reduce the value of the stock because of the consideration received from E?

A)$0
B)$500,000
C)$1,000,000
D)$1,500,000

Question 44

During K's lifetime, he made taxable gifts totaling $750,000, on which he paid gift taxes of $169,000.All gifts were made after 1976.Upon K's death in the current year his taxable estate was $5,000,000.Based on these facts and ignoring the unified credit, what is the Federal estate tax payable by the estate of K?

A)$1,993,300
B)$1,824,300
C)$0
D)None of the above

Question 45

Which of the following is not deductible in computing the taxable estate of decedent Y?

A)The expense of Y's funeral
B)Legal fees to the attorneys representing Y's estate during probate of Y's will
C)A personal debt owed by Y to a close friend
D)A payment to Y's housekeeper in satisfaction of a bequest made under the terms of Y's will