Question 1

A serial gift strategy uses multiple gifts to maximize the value of the annual exclusion.

Accepted Answer

A serial gift strategy involves giving multiple gifts over time to maximize the annual exclusion, which allows individuals to gift up to a certain amount each year without incurring gift tax. By spreading out the gifts over time, the giver can avoid surpassing the annual exclusion and potentially reduce their overall tax liability.

Question 2

The estate and gift taxes share several common features. Which of the following characteristics is common to both the estate and gift taxes?

Accepted Answer

The answer of The estate and gift taxes share several...

Question 3

The testamentary transfer of property to a qualified charity is deductible in calculating the taxable estate without any ceiling limitation.

Accepted Answer

The testamentary transfer of property to a qualified charity is deductible in calculating the taxable estate without any ceiling limitation. This means that the full value of the donation can be deducted from the taxable estate, reducing the amount of estate tax owed by the estate.

Question 4

The estate and gift taxes share several common features. Which of the following characteristics is common to both the estate and gift taxes?

Accepted Answer

Both the estate and gift taxes have an applicable credit (also known as a unified credit) which can be used to offset the tax liability, and a marital deduction which allows for unlimited tax-free transfers between spouses.

Question 5

A trust is a legal entity that can only exist for a year.

Accepted Answer

A trust is a legal entity that can exist for an unlimited amount of time, as specified in the trust document.

Question 6

Which of the following is a true statement about the federal gift tax return (Form 709)?

Accepted Answer

Form 709 must be filed if a taxpayer wishes to elect gift-splitting. Gift-splitting allows married couples to treat a gift made by one spouse as if it were made equally by both spouses, effectively doubling the annual gift tax exclusion amount. Therefore, they must file Form 709 to elect this option.

Question 7

Which of the following transactions would not utilize the "Section 7520 rate" to calculate the value of the transfer?

Accepted Answer

The Section 7520 rate is used to calculate the value of certain transfers for gift, estate, and generation-skipping transfer tax purposes. However, transfers to a spouse are generally not subject to these taxes and therefore would not require the use of the Section 7520 rate. The other choices all involve transfers that could potentially be subject to these taxes and would therefore require the use of the Section 7520 rate to calculate the value of the transfer.

Question 8

Which of the following statements is (are) true?

Accepted Answer

The answer of Which of the following statements is (are)...

Question 9

A serial gift strategy consists of arranging a trust to maximize the value of the applicable credit.

Accepted Answer

The answer of A serial gift strategy consists of arranging...

Question 10

Property inherited from a decedent has an adjusted basis equal to the value of the property included in the decedent's estate.

Accepted Answer

Property inherited from a decedent receives a step-up in basis, meaning its adjusted basis is equal to the fair market value of the property at the time of the decedent's death.

Question 11

Which of the following statements is (are) true for both gratuitous and testamentary transfers?

Accepted Answer

Both gratuitous and testamentary transfers are subject to estate and gift tax. Therefore, both types of transfers allow a charitable and a marital deduction in computing the taxable transfer. Choices A and B are only applicable to gift tax and not estate tax. Choice C is only applicable to gift tax and is not allowed for testamentary transfers.

Question 12

A bypass provision in a will requires a decedent to have a taxable estate in order to use an applicable credit to reduce total estate taxes on a married couple.

Accepted Answer

This is true because a bypass provision typically allows the executor of a married couple's estate to transfer assets up to the value of the applicable exemption amount, which can be used to reduce or eliminate estate taxes. However, in order for this provision to have any effect, the decedent must have a taxable estate that exceeds the exemption amount.

Question 13

A trust is a legal entity whose purpose is to hold and administer property for the benefit of beneficiaries.

Accepted Answer

This is the definition of a trust.

Question 14

When creating an estate tax planning strategy, the income tax benefit derived from a step-up in tax basis on assets should be measured against the estate tax cost of including the assets in the decedent's gross estate.

Accepted Answer

This statement is true. When determining the best estate tax planning strategy, it is important to weigh the income tax advantage of a step-up in tax basis against the potential estate tax cost of including the assets in the decedent's gross estate. This can help ensure that the strategy not only minimizes estate taxes, but also maximizes post-death income tax benefits for beneficiaries.

Question 15

The calculation of the value of a life estate in a trust generally does not depend upon which of the following factors?

Accepted Answer

The manner in which the trust corpus is invested does not directly affect the calculation of the value of a life estate, which is typically based on the age of the life tenant, the Section 7520 interest rate, and the value of the property at the time of the transfer.

Question 16

Life insurance is an asset that can be used to fund a trust to support a surviving spouse and yet may not be included in the decedent's gross estate.

Accepted Answer

Life insurance proceeds typically pass directly to the named beneficiary, bypassing probate and potentially avoiding inclusion in the decedent's gross estate. If the policy is owned by an irrevocable life insurance trust, it is definitely not included in the decedent's gross estate.

Question 17

Adjusted taxable gifts are included when calculating the taxable estate but are not subject to double taxation because a tax credit is provided for taxes payable on adjusted taxable gifts.

Accepted Answer

Adjusted taxable gifts are included in the calculation of the taxable estate, but they are not subject to double taxation because a tax credit is provided for any taxes payable on those gifts.

Question 18

Which of the following transfers is a complete gift?

Accepted Answer

The answer of Which of the following transfers is a...

Question 19

A gratuitous transfer of property made during the lifetime of the donor is called:

Accepted Answer

An inter vivos transfer is a transfer of property made during the lifetime of the donor, as opposed to a testamentary transfer, which occurs upon death.

Question 20

The applicable credit is designed to:

Accepted Answer

The applicable credit is primarily designed to prevent the taxation of cumulative transfers that do not exceed a certain minimum amount, ensuring that smaller estates or transfers can be passed on without being subject to tax, up to a specified threshold.

Quiz 14: Transfer Taxes and Wealth Planning

A serial gift strategy uses multiple gifts to maximize the value of the annual exclusion.

The estate and gift taxes share several common features. Which of the following characteristics is common to both the estate and gift taxes?

The testamentary transfer of property to a qualified charity is deductible in calculating the taxable estate without any ceiling limitation.

The estate and gift taxes share several common features. Which of the following characteristics is common to both the estate and gift taxes?

A trust is a legal entity that can only exist for a year.

Which of the following is a true statement about the federal gift tax return (Form 709) ?

Which of the following transactions would not utilize the "Section 7520 rate" to calculate the value of the transfer?

Which of the following statements is (are) true?

A serial gift strategy consists of arranging a trust to maximize the value of the applicable credit.

Property inherited from a decedent has an adjusted basis equal to the value of the property included in the decedent's estate.

Which of the following statements is (are) true for both gratuitous and testamentary transfers?

A bypass provision in a will requires a decedent to have a taxable estate in order to use an applicable credit to reduce total estate taxes on a married couple.

A trust is a legal entity whose purpose is to hold and administer property for the benefit of beneficiaries.

When creating an estate tax planning strategy, the income tax benefit derived from a step-up in tax basis on assets should be measured against the estate tax cost of including the assets in the decedent's gross estate.

The calculation of the value of a life estate in a trust generally does not depend upon which of the following factors?

Life insurance is an asset that can be used to fund a trust to support a surviving spouse and yet may not be included in the decedent's gross estate.

Adjusted taxable gifts are included when calculating the taxable estate but are not subject to double taxation because a tax credit is provided for taxes payable on adjusted taxable gifts.

Which of the following transfers is a complete gift?

A gratuitous transfer of property made during the lifetime of the donor is called:

The applicable credit is designed to: