Question 1

Farouk transfers bonds with a face value of $10,000 into his dependent son's name on January 1, 2017 as his son will turn 24 this year. The bonds pay 8 percent interest annually and Farouk bought the bonds in 2008 for $9,500 (the discount was not required to be amortized). His son sells the bonds for $10,500 at the end of 2017 after receiving the 2017 interest. If Farouk is in the 39.6 percent marginal tax bracket, how much did he save in 2017 in taxes by transferring the bonds into his son's name. His son had no other income in 2017.

Accepted Answer

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Question 2

Weilin's gross estate was valued at $4,870,000 when he died in 2017. His estate paid administration expenses of $100,000 and funeral expenses of $25,000. Weilin left $50,000 to Georgia State University and $500,000 in a qualifying terminable interest property trust for his second wife. If Weilin had made $1,500,000 of prior taxable gifts in 2014, paying a gift tax of $175,000 on these gifts, how much estate tax would the estate have had to pay in 2017?

Accepted Answer

The answer of Weilin's gross estate was valued at $4,870,000...

Question 3

The estate tax

Accepted Answer

The answer of The estate tax
...

Question 4

Indicate by a T if the following results in a taxable gift and an N if it does not result in a taxable gift.
-_____ i. $30,000 transferred into a minor's trust

Accepted Answer

The answer of Indicate by a T if the following...

Question 5

Indicate by a T if the following results in a taxable gift and an N if it does not result in a taxable gift.
-_____g. Transfer of a house valued at $500,000 held in joint tenancy to the wife according to the divorce decree

Accepted Answer

The answer of Indicate by a T if the following...

Question 6

Indicate by a T if the following results in a taxable gift and an N if it does not result in a taxable gift.
-_____b. Corky transferred ownership of a $50,000 life insurance policy with a $5,000 cash surrender value to his wife.

Accepted Answer

The answer of Indicate by a T if the following...

Question 7

The annual gift tax exclusion

Accepted Answer

The answer of The annual gift tax exclusion
...

Question 8

Indicate by a T if the following results in a taxable gift and an N if it does not result in a taxable gift.
-_____f. $20,000 transferred into Crummy trust with gift splitting elected.

Accepted Answer

The answer of Indicate by a T if the following...

Question 9

Indicate by a T if the following results in a taxable gift and an N if it does not result in a taxable gift.
-_____e. Converting a $500,000 revocable trust into an irrevocable trust

Accepted Answer

The answer of Indicate by a T if the following...

Question 10

Bobbie, age 10, has $6,000 in interest from a trust established by her grandmother. Bobbie has no itemized deductions, no other income, and her parents are in the 33 percent marginal tax bracket. What is the total tax on this income?

Accepted Answer

The answer of Bobbie, age 10, has $6,000 in interest...

Question 11

Indicate by a T if the following results in a taxable gift and an N if it does not result in a taxable gift.
-_____ h. $60,000 value of a remainder interest in a trust created this year

Accepted Answer

The answer of Indicate by a T if the following...

Question 12

Sarah and Clem are very wealthy and have a program of charitable and family giving. In 2017, they give $20,000 to each of their 4 grandchildren, $30,000 to Clem's brother, stock valued at $40,000 (basis = $20,000) to the Cancer society, and they buy a home valued at $525,000 for Sarah's mother. In addition, Clem puts $500,000 of his stock in the family's business into Sarah's name and sets up a revocable trust for Sarah's sister with $100,000 in bonds. If Clem made $1,900,000 and Sarah $1,300,000 in taxable gifts in 2016, their only prior-year taxable gifts, what are Clem's and Sarah's taxable gifts in 2017 if they elect gift splitting?

Accepted Answer

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Question 13

John made $3,400,000 in taxable gifts prior to his death at the beginning of 2017. His wife, Lola, is the executor of John's estate, and made taxable gifts of $800,000 prior to 2017. What is the maximum amount of taxable lifetime gifts that Lola can make in 2017 before she will have to begin paying a gift tax?

Accepted Answer

($5,490,000 - $3,400,000) + ($5,490,000 - $800,000) = $6,780,000.

Question 14

Indicate by a T if the following results in a taxable gift and an N if it does not result in a taxable gift.
-_____c. $600,000 placed in an irrevocable trust

Accepted Answer

The answer of Indicate by a T if the following...

Question 15

Rachel owned four assets when she died in 2017.
Asset Date of Death Value Alternate Date Valuation
A $1,160,000 $1,180,000
B 2,200,000 2,390,000
C 3,250,000 3,310,000
D 825,000 700,000
Which value should the executor or personal representative use for valuing the gross estate? Explain.

Accepted Answer

The answer of Rachel owned four assets when she died...

Question 16

Indicate by a T if the following results in a taxable gift and an N if it does not result in a taxable gift.
-_____a. John put $50,000 of his money into a joint bank account with his son

Accepted Answer

The answer of Indicate by a T if the following...

Question 17

Indicate by a T if the following results in a taxable gift and an N if it does not result in a taxable gift.
-_____ j. $100,000 diamond ring given to a fiancé

Accepted Answer

The answer of Indicate by a T if the following...

Question 18

Indicate by a T if the following results in a taxable gift and an N if it does not result in a taxable gift.
-_____d. $14,000 paid to the University of Oklahoma for a foster child's tuition

Accepted Answer

The answer of Indicate by a T if the following...

Question 19

Carl gave his six children gifts of $15,000 each in the current year.

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Question 20

In 2017, Boris put $7,000,000 in an irrevocable trust for his great grandson. What amount of tax will Boris have to pay because of this transfer?

Accepted Answer

The answer of In 2017, Boris put $7,000,000 in an...

Quiz 12: Estates, Gifts, and Trusts

The estate tax

Indicate by a T if the following results in a taxable gift and an N if it does not result in a taxable gift. -_____ i. $30,000 transferred into a minor's trust

Indicate by a T if the following results in a taxable gift and an N if it does not result in a taxable gift. -_____g. Transfer of a house valued at $500,000 held in joint tenancy to the wife according to the divorce decree

Indicate by a T if the following results in a taxable gift and an N if it does not result in a taxable gift. -_____b. Corky transferred ownership of a $50,000 life insurance policy with a $5,000 cash surrender value to his wife.

The annual gift tax exclusion

Indicate by a T if the following results in a taxable gift and an N if it does not result in a taxable gift. -_____f. $20,000 transferred into Crummy trust with gift splitting elected.

Indicate by a T if the following results in a taxable gift and an N if it does not result in a taxable gift. -_____e. Converting a $500,000 revocable trust into an irrevocable trust

Bobbie, age 10, has $6,000 in interest from a trust established by her grandmother. Bobbie has no itemized deductions, no other income, and her parents are in the 33 percent marginal tax bracket. What is the total tax on this income?

Indicate by a T if the following results in a taxable gift and an N if it does not result in a taxable gift. -_____ h. $60,000 value of a remainder interest in a trust created this year

Indicate by a T if the following results in a taxable gift and an N if it does not result in a taxable gift. -_____c. $600,000 placed in an irrevocable trust

Rachel owned four assets when she died in 2017. Asset Date of Death Value Alternate Date Valuation A $1,160,000 $1,180,000 B 2,200,000 2,390,000 C 3,250,000 3,310,000 D 825,000 700,000 Which value should the executor or personal representative use for valuing the gross estate? Explain.

Indicate by a T if the following results in a taxable gift and an N if it does not result in a taxable gift. -_____a. John put $50,000 of his money into a joint bank account with his son

Indicate by a T if the following results in a taxable gift and an N if it does not result in a taxable gift. -_____ j. $100,000 diamond ring given to a fiancé

Indicate by a T if the following results in a taxable gift and an N if it does not result in a taxable gift. -_____d. $14,000 paid to the University of Oklahoma for a foster child's tuition

Carl gave his six children gifts of $15,000 each in the current year.

In 2017, Boris put $7,000,000 in an irrevocable trust for his great grandson. What amount of tax will Boris have to pay because of this transfer?