Deck 12: Estates, Gifts, and Trusts

Question 1

The gift tax and estate taxes were imposed in 1932 and 1916, respectively.

Answer 1

True

Question 2

Painting a house for your mother is not a taxable gift.

Answer 2

True

Question 3

If two properties are currently of equal value, giving away the property least likely to appreciate would reduce potential estate value.

Answer 3

False

Question 4

Gifts are valued at their fair market value on the date of the gift and the donee takes this fair market value as basis.

Question 5

Putting cash into a joint bank account is a gift to the joint tenant when deposited.

Question 6

The tax on generation skipping transfers has been repealed.

Question 7

The kiddie tax applies to all unearned income of a child under 19.

Question 8

A taxpayer must not retain any incidents of ownership in a life insurance policy on his or her life to have it excluded from his or her taxable estate.

Question 9

Probate determines the property included in a decedent's taxable estate.

Question 10

A taxpayer can elect to pay a gift tax rather than use part of his or her unified credit.

Question 11

The executor can elect the alternative valuation date only if both the value of the estate and the estate tax are reduced.

Question 12

Only gift taxes of a present interest in property are eligible for the unified credit.

Question 13

Gift splitting allows a married couple to use both their annual exclusions in determining taxable gifts.

Question 14

Payment to a college for a grandchild's tuition is not a taxable gift.

Question 15

No estate tax is due if a husband leaves his entire estate to his wife.

Question 16

A trust always involves at least three different individuals.

Question 17

A Section 529 education savings plan can only be used for the education of the specific child it was set up to benefit.

Question 18

Gifts to most charities are not subject to gift taxes.

Question 19

With a revocable trust, the grantor can change the terms of a trust at will.

Question 20

The widow of a decedent may add the decedent's remaining lifetime exclusion to her lifetime exclusion only if the estate executor makes an irrevocable election.

Question 21

What is the limit on the amount of property that can be transferred to a spouse free of any transfer taxes?

A)$15,000 per year
B)$1,000,000
C)An unlimited amount
D)All transfers to a spouse are subject to transfer taxes

Question 22

The gift tax

A)can apply to tuition paid directly to a school by an unrelated party.
B)is not levied when setting up a revocable trust.
C)applies to property transfers between divorcing parties.
D)Both (a) and (c).

Question 23

Which of the following is a taxable gift?

A)$25,000 given to the Democratic party.
B)$24,000 paid to Stanford University by Joel for the tuition for his best friend's son.
C)$100,000 given to the Red Cross.
D)None are taxable gifts.

Question 24

Cheryl bought some stock for $110,000.Two years later, she gave the stock to her brother, Harold, when its value was $100,000.Three years later, Harold sold the stock for $105,000.What is the value of the gift to Harold, and his gain or loss on the sale, respectively?

A)$100,000; 0 gain/loss
B)$100,000; $5,000 gain
C)$110,000; 0 gain/loss
D)$110,000; $5,000 loss

Question 25

Jessica is doing her year-end tax planning and is concerned about gift taxes.If she comes to you for advice, which of the following would you tell her is a taxable gift?

A)Payment to the doctor for her gardener's medical expenses
B)Tuition paid to Norden University for her hairdresser's daughter, Trisha.
C)A donation to her favorite political organization
D)Buying a $20,000 car for Trisha when she goes away to Norden University

Question 26

John made $3,400,000 in taxable gifts prior to his death at the beginning of 2019.His wife, Lola, is the executor of John's estate, and made taxable gifts of $800,000 prior to 2019.What is the maximum amount of taxable lifetime gifts that Lola can make in 2019 before she will have to begin paying a gift tax?

A)$22,360,000
B)$18,600,000
C)$6,780,000
D)$4,630,000

Question 27

An income tax return for a fiduciary uses the same income tax rate schedule as an individual filing a separate return.

Question 28

Charles gave his three grandsons $21,000 each, his friend, Joe, $16,000, and his daughter $31,000.His second wife, Marla, gave her three children $51,000 each and $50,000 to her church.What are their combined taxable gifts if they do not elect gift splitting?

A)$305,000
B)$255,000
C)$143,000
D)$ 71,000

Question 29

Charles gave his three grandsons $20,000 each, his friend, Joe, $15,000, and his daughter $32,000.His second wife, Marla, gave her three children $52,000 each and $50,000 to her church.What are Charles and Marla's taxable gifts if they elect gift splitting?

A)$68,000
B)$90,000
C)$145,000
D)$193,000

Question 30

Chloe gave $16,000 to her son, $21,000 to her daughter, and paid $18,000 to the University of Delaware for her niece's tuition.She gave $12,000 to the United Way campaign, and $18,000 to her church.What is the amount of Chloe's taxable gifts?

A)$ 7,000
B)$15,000
C)$35,000
D)$53,000

Question 31

The donor of a trust is the same as

A)the beneficiary.
B)the trustee.
C)the grantor.
D)the fiduciary.

Question 32

The following transfer(s) is excluded from gift taxes:

A)John makes a $15,000 payment to Shands Hospital on behalf of Martha.
B)Cal transferred his half of their house to Colleen as part of their divorce settlement.
C)Jonathon gave his grandson a Jaguar automobile when he graduated from College.
D)Both (a) and (b).

Question 33

A trust that features a demand provision by a beneficiary equal to the annual exclusion is

A)an irrevocable trust.
B)a revocable trust.
C)a Crummy trust.
D)a trust established under the UTMA.

Question 34

Giving appreciating property away reduces the potential lifetime transfer tax for an estate.

Question 35

An income interest in a trust

A)must be established for a fixed term in years.
B)is not eligible for the annual exclusion.
C)must be irrevocable to be eligible for the annual exclusion.
D)is irrevocable if the donor only controls who may receive trust income.

Question 36

In 2019, Bill and his wife, Helen, made the following gifts: Bill's gifts: $50,000 to each of his five children; $30,000 to each of his six grandchildren; $100,000 to Central Hospital for his nephew's hospital bill.Helen's gifts: $100,000 to each of her two children; $50,000 to each of her three grandchildren; $200,000 a state senator's reelection campaign.
What are Bill's and Helen's respective taxable gifts (before their unified credit) if they do not elect gift splitting.

A)$530,000; $550,000
B)$430,000; $350,000
C)$265,000; $275,000
D)$80,000; $150,000

Question 37

The annual gift tax exclusion

A)cannot increase beyond $15,000 per donor.
B)does not apply to a bargain purchase between related persons.
C)applies to future interests.
D)removes small gifts from taxation.

Question 38

In 2019, Bill and his wife, Helen, made the following gifts: Bill's gifts: $50,000 to each of his five children; $30,000 to each of his six grandchildren; $100,000 to Central Hospital for his nephew's hospital bill.Helen's gifts: $100,000 to each of her two children; $50,000 to each of her three grandchildren; $200,000 a state senator's reelection campaign.
What are Bill's and Helen's respective taxable gifts (before their unified credit) if they elect gift splitting.

A)$150,000; $150,000
B)$276,000; $280,000
C)$430,000; $350,000
D)$530,,000; $550,000

Question 39

Carl gave his six children gifts of $16,000 each in the current year.

A)Carl has made $90,000 of taxable gifts.
B)Carl has made $6,000 of taxable gifts.
C)Carl has made no taxable gifts if he and his wife elect gift splitting.
D)(b) and (c) are both true.

Question 40

Which of the following gifts is not eligible for the annual exclusion?

A)$20,000 given to a spouse
B)The remainder interest in a trust
C)$100,000 given to North Carolina State University.
D)All are eligible for the annual exclusion.

Question 41

All of the following apply to the Coverdell education savings account except:

A)Beneficiaries may be able to be changed.
B)Allows the same contribution as a Section 529 qualified tuition plan.
C)Has a $2,000 annual contribution limit.
D)Limits the contribution of higher income taxpayers.

Question 42

When Shipley died, he owned $100,000 in bonds that he left to his church, a $400,000 house held in joint tenancy with right of survivorship with his brother, and a collection of antique automobiles valued at $1,300,000 that he left to his son.What are Shipley's probate estate and his gross estate, respectively?

A)$1,600,000; $1,300,000
B)$1,400,000; $1,300,000
C)$1,600,000; $1,600,000
D)$1,400,000; $1,600,000

Question 43

Crystal deposited $50,000 into a joint savings account in her name and the name of her son, Jason.Later that same year, Jason withdrew $16,000 from the account.If Crystal made no other gifts to Jason during that year, what is the value of Crystal's taxable gifts (before applying the unified credit)?

A)$1,000
B)$12,000
C)$16,000
D)$25,000

Question 44

Which of the following is a taxable gift (before applying the unified credit)?

A)Christian transfers $5,000 to his friend Crystal
B)Carmen gives $5,000 in stocks to her church
C)Yamile gives $30,000 to her husband, Jose.
D)Jessica transfers $30,000 into an irrevocable trust for the benefit of her two children.

Question 45

The federal gift tax is:

A)imposed upon the recipient of gifts
B)imposed upon property in the estate of a deceased person
C)imposed upon the donor on lifetime gift transfers
D)imposed upon the donee only if a gift is not subject to income taxes

Question 46

The unified credit for 2019 gifts is equivalent to an exemption amount of:

A)$1,000,000
B)$3,500,000
C)$5,490,000
D)$11,400,000

Question 47

What is the benefit(s) of a living trust?

A)Keeps assets in the trust out of the gross estate.
B)Keeps assets in the trust out of the probate estate.
C)Maintains privacy for the beneficiaries.
D)Both (b) and (c).

Question 48

The kiddie tax can only be imposed on

A)the earned income of a child under 18.
B)unearned income of a child in excess of $2,200.
C)income only from property given to a child
D)the unearned income of a child in excess of the standard deduction

Question 49

Glenda, age 8, has $6,150 interest from a trust fund established by her grandfather several years ago.What is Glenda's tax liability?

A)$848
B)$694
C)$584
D)$395

Question 50

The alternate valuation date is:

A)3 months after the date of death
B)6 months after the date of death
C)9 months after the date of death
D)12 months after the date of death

Question 51

The amount of the kiddie tax is the sum of

A)the child's tax on the child's earned income and the tax on all the child's unearned income at the trust and estate's tax rates.
B)the trust and estate's tax rate on the child's unearned income and the child's tax on the earned income.
C)the trust and estate's tax rate on the child's unearned income in excess of $2,200 and the child's tax on the balance of his or her taxable income.
D)$1,100 or the tax on unearned income.

Question 52

Glenda, age 8, has $6,150 interest from a trust fund established by her grandfather several years ago.How much of Glenda's income is taxed at the trust and estate's tax rate?

A)$6,150
B)$5,050
C)$3,950
D)$1,100

Question 53

Which of the following statements is true regarding the filing of a gift tax return?

A)Spouses using the gift-splitting provision do not have to file a return unless the gifts exceed $30,000.
B)A gift tax return must be filed when a gift to a church exceeds the annual exclusion.
C)A gift tax return is due within five months of making the gift.
D)No gift tax return is required to be filed for gifts between spouses.

Question 54

Which of the following transfers is taxable under the gift tax statutes?

A)Mark sold land to an unrelated party for less than its fair market value because he needed cash in a hurry.
B)After a friend's death, Sharron wrote a check to the university to pay the college tuition for the friend's son.
C)Marilynn wrote checks to the landlord to pay her aunt's rent for ten months when her aunt was unemployed.
D)Jose wrote a check to the doctor to pay a friend's medical bill when he had surgery.

Question 55

At the time Karen left for college, her grandfather loaned her $100,000 to be used to pay for her college expenses.She signed a note stating that she would begin repaying the loan over 10 years beginning 6 months after graduation.There is no interest specified for the loan.Which of the following is true?

A)The grandfather has interest income on the loan.
B)The grandfather has made a gift of $100,000 to Karen at the time of the loan.
C)Karen can deduct interest expense on the loan
D)Karen owes gift taxes in the year of the loan

Question 56

Which of the following statements does not apply to a revocable trust?

A)The grantor of the trust is taxed on trust income.
B)The trust property is included in the grantor's gross estate.
C)Revocable trusts are all simple trusts.
D)The grantor makes a gift when the trust distributes trust income to a beneficiary.

Question 57

All of the following are deductions from the gross estate except

A)the decedent's funeral expenses.
B)charitable bequests.
C)the annual exclusion.
D)a credit card bill of the decedent.

Question 58

Which of the following does not apply to the estate tax in effect in 2019?

A)The tax is assessed on the adjusted basis of the decedent's estate.
B)Taxable gifts are integrated with the estate value to determine the estate tax.
C)The gift and estate tax rate schedules are the same.
D)The unified credit applies to gifts and estates.

Question 59

Silvia has three grandchildren.What is the maximum amount that she can contribute this year to a Section 529 education plan without incurring a gift tax?

A)$14,000
B)$42,000
C)$70,000
D)$225,000

Question 60

George made a gift of stock valued at $450,000 (basis = $300,000) to his daughter Sally and was required to pay a gift tax of $30,000 on this gift.Which of the following is true regarding this gift?

A)Sally has a basis of $300,000 for gain in the stock
B)Sally has a basis of $310,000 for gain in the stock
C)Sally has a basis of $330,000 for gain in the stock
D)Sally has a basis of $450,000 for gain in the stock

Question 61

Distributable net income (DNI) is

A)Is the maximum taxable distribution to a beneficiary from a trust
B)Is not taxable to the beneficiaries if it is a distribution of nontaxable income
C)Is the amount available for distribution from the trust
D)All are characteristics of DNI

Question 62

William set up a trust for his parents.Each parent is to receive one-half of the income for his or her lifetime; when one parent dies, all income is to go to the surviving parent.When the other parent dies, the remainder is to go to William.This trust is

A)A revocable trust.
B)An irrevocable trust.
C)A grantor trust.
D)A complex trust.

Question 63

Distributable net income

A)limits the amount of a distribution that is taxable to the beneficiary.
B)is only made up of taxable income.
C)is the minimum amount that must be distributed by a complex trust.
D)is the dividend and interest earned by a trust in a year less expenses.

Question 64

In April 2019, Kylie (a calendar-year individual) became a beneficiary of a new calendar-year trust and an estate that elects a January 31 fiscal year-end.During 2019, Kylie received income distributions of $12,000 from the trust and $17,000 from the estate.How much of these distributions is taxable to Kylie on her 2019 Form 1040 tax return?

A)$0
B)$12,000
C)$17,000
D)$29,000

Question 65

A fiduciary tax return must be filed for

A)a decedent
B)a decedent's estate
C)the grantor of a trust
D)the donee of a taxable gift

Question 66

A simple calendar-year trust has one income beneficiary, Juliana.The trust has accounting income of $40,000 and DNI of $28,000 for 2019.Included in DNI is $9,000 of net tax-exempt income.Juliana received a distribution from the trust of $40,000 in 2019.How much of the distribution must Juliana included in her taxable income for 2019?

A)$40,000
B)$31,000
C)$28,000
D)$19,000

Question 67

The basic deduction allowed on an estate income tax return is

A)$4,000
B)$2,100
C)$600
D)$300

Question 68

Both gross annual gifts and the gross estate are reduced for

A)charitable gifts.
B)gifts to a spouse.
C)annual exclusion.
D)Both (a) and (b).

Question 69

Which of the following would not be income in respect of a decedent who dies on January 4?

A)Interest credited a savings account on January 2 but not withdrawn.
B)A dividend declared on December 31 payable on January 15.
C)Salary payable on January 10.
D)$30,000 in the decedent's 401-K plan.

Question 70

A fiduciary tax return is filed by

A)a trustee.
B)a grantor.
C)an executor.
D)Both (a) and (c).

Question 71

Appreciated property that was inherited in 2019

A)will have a stepped-up basis.
B)avoids income tax on the appreciation prior to the date of death.
C)avoids income tax on any post inheritance appreciation on a future sale.
D)(a) and (b) only.

Question 72

The following gifts could be subject to the generation skipping transfer tax except:

A)A gift from a grandmother to her grandson.
B)A gift of a great grandfather to his great granddaughter.
C)A gift from a great uncle to a great niece.
D)A gift from a grandson to a grandfather.

Question 73

Which of the following is an advantage to making a lifetime transfer of property to a donee?

A)It may receive a basis higher than fair market value for the gift tax.
B)It removes property from the taxable estate.
C)It receives a step-up in basis to fair market value.
D)Appreciation escapes taxation when it is sold at a later date.

Question 74

Carey is trustee of the Floyd Family Trust.The trust distributes $20,000 income to George, $10,000 to Linda, and $5,000 to George and Linda's church.The Floyd Family trust is:

A)A reversionary trust.
B)An irreversible trust.
C)A simple trust.
D)A complex trust.

Question 75

Which of the following is not an advantage of lifetime gifts?

A)The annual exclusion can shield thousands of dollars from taxation.
B)Property appreciation does not enter the estate tax calculation.
C)A stepped-up basis is secured for appreciated gifts.
D)Gift-splitting allows spouses to combine their annual exclusions

Question 76

Which of the following applies to a simple trust?

A)It is allowed a $100 deduction on its income tax return
B)It is required to make annual charitable contributions
C)It must distribute its accounting income to its beneficiaries annually
D)The trustee must distribute capital gain income

Question 77

Clarice, age 90, has accumulated $1.5 million in net assets.Included in this are three blocks of stock: Stock A has a basis of $300,000 and a fair market value of $400,000; Stock B has a basis of $400,000 and a fair market value of $200,000; Stock C has a basis of $100,000 and a fair market value of 400,000.Clarice needs $200,000 now to pay off the mortgage on her daughter's home and she wants to make a $400,000 donation to her Church either as a lifetime or testamentary transfer.Which assets should she sell to accomplish this with the least current tax cost?

A)Sell Stocks A and C now.
B)Sell Stock B and leave stock C to the Church upon her death.
C)Sell Stock A and leave stock C to the Church upon her death.
D)Sell Stock C and leave Stock B to the Church upon her death.

Question 78

The alternate valuation date for an estate

A)is elected by beneficiaries
B)should be elected if the size of the estate increases to receive higher bases
C)values the estate six months after the date of death
D)does not require the filing of an estate tax return to make the election

Question 79

When comparing lifetime transfers to testamentary transfers, which of the following would be preferable as a testamentary transfer?

A)The property to be transferred has declined in value.
B)The property has increased in value.
C)The property is an insurance policy on the life of the transferor.
D)The property transferred is transferred to a qualified charity.