Identify which of the following statements is true.
A)The creation of a joint bank account constitutes a taxable gift.
B)The creation of a joint tenancy by one person will result in a gift equal to the other joint tenant's pro rata interest in the property.
C)The naming of a life insurance policy beneficiary constitutes a gift for transfer tax purposes.
D)Since municipal bond interest is exempt from federal income taxation, gifting the bonds escapes the gift tax.

Question

Quizplus · Accepted Answer

The creation of a joint tenancy by one person, where the other joint tenant receives an immediate interest in the property, is considered a gift to the extent of the other tenant's interest. This is because the donor is relinquishing control over a portion of the property's value in favor of the other tenant. Choices A, C, and D are incorrect because: A) Simply creating a joint bank account does not in itself constitute a taxable gift unless the other party withdraws funds; C) Naming a beneficiary for a life insurance policy does not constitute a gift for transfer tax purposes as the transfer of benefits occurs upon the death of the insured, not at the time of naming the beneficiary; and D) The fact that municipal bond interest is exempt from federal income tax does not mean that gifting such bonds escapes the gift tax. The gift tax applies based on the value of the gift, not its income tax treatment.

Identify Which of the Following Statements Is True