Question 1

Identify which of the following statements is true.

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Question 2

Jason funds an irrevocable trust with Liberty Bank as trustee and reserves the right to receive the income for seven years.He provides that at the end of the seventh year,the trust assets will pass outright to his adult daughter,Paula,or to Paula's estate should Paula not be alive.Jason transfers assets valued at $1.5 million to the trust;the assets at present are producing income of about 7.5% per year.Assume that the Sec.7520 rate per the actuarial tables for the month of the transfer is 10%.What tax issues should Jason consider regarding the trust?

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Question 3

Bryce pays $10,000 for his adult grandson's tuition at medical school and $8,000 for the grandson's room and board in the medical school's dormitory.All payments are made directly to the medical school.Do these payments by Bryce qualify as gifts?

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Question 4

Discuss the statutory exemptions from the gift tax.

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Question 5

Abby transfers $10,000 to a political organization to promote her favorite candidate for president.Does Abby's transfer qualify as a gift?

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Question 6

Tia funds an irrevocable trust with $100,000,naming Vonda to receive income for life.Tia also grants Vonda a general power of appointment during her life.During the next year,Vonda directs the trustee to give $100,000 to Rick.Which of the following statements is not correct?

Accepted Answer

Tia made a gift of $100,000 to Vonda by funding the trust with that amount. Vonda, as the income beneficiary and holder of the general power of appointment, made the gift of $100,000 to Rick by directing the trustee to distribute the funds to him. Exercising a general power of appointment does constitute a gift, but in this scenario, it was Vonda who made the gift, not Tia. Therefore, choice A is not correct.

Question 7

Identify which of the following statements is false.

Accepted Answer

A trust for a minor (Sec.2503(c) trust) can distribute income currently or accumulate it within certain limits. It does not have to distribute all of its income currently in order to qualify for the annual exclusion. Therefore, statement C is false. Statements A, B, and D are all true.

Question 8

George transfers property to an irrevocable trust for the benefit of his adult children and names himself as trustee.The trust document requires the trustee to distribute trust property to the beneficiaries at the trustee's discretion with the possibility of no distribution to certain beneficiaries as the trustee deems appropriate.The trust will terminate at the end of nine years,and the property will pass to George's children.Which of the following statements is correct?

Accepted Answer

The beneficiaries do not receive a present interest in the trust property because the trustee has discretion over distributions. The transfer by George is not eligible for the annual gift tax exclusion because it is a gift of a future interest. The transfer is also taxed under gift tax rules at the date of transfer.

Question 9

On June 1,Sherri deposits $60,000 into a new joint bank account in the names of Sherri and John.Her friend John makes no deposits.On December 15th,John withdraws $25,000 from the joint account.What are the gift tax consequences,if any?

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Question 10

What is a "net gift" and what is the potential income tax problem associated with making a net gift?

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Question 11

Yuli wants to help his adult grandson,Jerry,become a CPA.He pays all of Jerry's tuition this year,which totals $20,000.He also pays $9,000 for Jerry's room and board at school.Yuli makes the payments directly to the school.What are the gift tax consequences?

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Question 12

Connie has some acreage that is valued at $1,500,000.Her daughter would like to build a home on it,but can only afford $500,000.Connie agrees to sell it to her daughter for $500,000.Is there any gift tax consequence as a result of this transaction?

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The answer of Connie has some acreage that is valued...

Question 13

Ida sells some stock to Mae for $20,000 at a time when the stock is valued at $50,000.Later in the year,she gives Mae $15,000 in cash.
a)What is the amount of Ida's taxable gifts?
b)How would your answer to Part (a)change if Ida gave the cash to Jonathan instead of to Mae?

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Question 14

A "Crummey demand power" in a trust document allows the donor to demand a distribution from the trust in years in which earnings exist within the trust.

Accepted Answer

A "Crummey demand power" actually gives the beneficiaries, not the donor, the right to withdraw contributions made to the trust for a limited period of time, typically 30 or 60 days after the contribution is made. This feature is used to qualify gifts for the annual gift tax exclusion.

Question 15

On March 1,Bruce transfers $300,000 to a revocable trust with Sprint Bank as trustee.The trustee must pay out all the income to Sam during Sam's lifetime.At Sam's death,the property is to be paid to Sam Jr.On December 31,the trustee distributes $40,000 of income to Sam.What date did a gift occur? What was the amount of the gift?

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Question 16

Ward and June decide to divorce after 30 years of marriage.Ward transfers $500,000 to June in settlement of her property rights.What are the gift tax consequences of this transfer?

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Question 17

On September 1,George transfers his entire ownership rights in a $250,000 life insurance policy on his own life to his sister,Sally.The policy's interpolated terminal reserve is $30,000 as of September 1.On July 1,George had paid the policy's $6,000 annual premium.What are the gift tax consequences,if any?

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Question 18

Karen purchased a beach house for $300,000 and immediately titled it in the names of Karen and Kenny,as joint tenants with right of survivorship.Karen and Kenny are not married.Did a gift occur? If so,for what amount?

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Question 19

Identify which of the following statements is true.

Accepted Answer

A) This is true, as one purpose of the annual exclusion is to eliminate the need for accounting and reporting for small gifts.
B) This is also true, as the gift tax exclusion is only available for gifts of present interest.
C) This is the definition of present interest, which is necessary for understanding gift tax rules. 
Thus, all of the given statements are true.

Question 20

On September 1,George transfers his entire ownership rights in a $250,000 life insurance policy on his own life to his sister,Sally.The policy's interpolated terminal reserve is $30,000 as of September 1.On July 1,George had paid the policy's $6,000 annual premium.On July 1 of the subsequent year,George again paid the premium on the policy.What are the gift tax consequences in the subsequent year,if any?

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The answer of On September 1,George transfers his entire ownership...

Quiz 12: The Gift Tax

Identify which of the following statements is true.

Bryce pays $10,000 for his adult grandson's tuition at medical school and $8,000 for the grandson's room and board in the medical school's dormitory.All payments are made directly to the medical school.Do these payments by Bryce qualify as gifts?

Discuss the statutory exemptions from the gift tax.

Abby transfers $10,000 to a political organization to promote her favorite candidate for president.Does Abby's transfer qualify as a gift?

Tia funds an irrevocable trust with $100,000,naming Vonda to receive income for life.Tia also grants Vonda a general power of appointment during her life.During the next year,Vonda directs the trustee to give $100,000 to Rick.Which of the following statements is not correct?

Identify which of the following statements is false.

On June 1,Sherri deposits $60,000 into a new joint bank account in the names of Sherri and John.Her friend John makes no deposits.On December 15th,John withdraws $25,000 from the joint account.What are the gift tax consequences,if any?

What is a "net gift" and what is the potential income tax problem associated with making a net gift?

Yuli wants to help his adult grandson,Jerry,become a CPA.He pays all of Jerry's tuition this year,which totals $20,000.He also pays $9,000 for Jerry's room and board at school.Yuli makes the payments directly to the school.What are the gift tax consequences?

Connie has some acreage that is valued at $1,500,000.Her daughter would like to build a home on it,but can only afford $500,000.Connie agrees to sell it to her daughter for $500,000.Is there any gift tax consequence as a result of this transaction?

Ida sells some stock to Mae for $20,000 at a time when the stock is valued at $50,000.Later in the year,she gives Mae $15,000 in cash. a)What is the amount of Ida's taxable gifts? b)How would your answer to Part (a)change if Ida gave the cash to Jonathan instead of to Mae?

A "Crummey demand power" in a trust document allows the donor to demand a distribution from the trust in years in which earnings exist within the trust.

Ward and June decide to divorce after 30 years of marriage.Ward transfers $500,000 to June in settlement of her property rights.What are the gift tax consequences of this transfer?

Karen purchased a beach house for $300,000 and immediately titled it in the names of Karen and Kenny,as joint tenants with right of survivorship.Karen and Kenny are not married.Did a gift occur? If so,for what amount?

Identify which of the following statements is true.