Question 1

Roger makes a $1,000,000 cash gift on January 1 of the current year,and dies on February 1 of the current year.Roger's gift tax return is due

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The answer of Roger makes a $1,000,000 cash gift on...

Question 2

Interest-free or below-market loans

Accepted Answer

Interest-free or below-market loans may result in treating the borrower as paying interest, which means that imputed interest income may need to be reported by the borrower. However, it doesn't always result in treating the entire loan proceeds as a gift, and there isn't a specific minimum amount of imputed interest income that must be reported.

Question 3

Steve gave stock with an adjusted basis of $7,000 and an FMV of $10,000 to Alice.No gift tax was paid.Later,Alice sold the stock for $12,000.The gain Alice will recognize on the sale is

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The answer of Steve gave stock with an adjusted basis...

Question 4

Identify which of the following statements is false.

Accepted Answer

Gift tax returns are due by April 15 of the year following the gift, but an automatic extension can be requested, which allows the taxpayer to file the gift tax return by October 15. However, the extension only applies to the filing of the return; any gift tax owed must still be paid by April 15.

Question 5

Virginia gave stock with an adjusted basis of $8,000 and an FMV of $10,000 to Carmen.No gift tax was paid on the transfer.Carmen then sold the stock for $9,000.The gain or loss Carmen will recognize on the sale is

Accepted Answer

Carmen's basis in the gifted stock is the donor's adjusted basis, which is $8,000, because the stock was sold for more than the adjusted basis but less than the FMV at the time of the gift. Carmen sold the stock for $9,000, resulting in a $1,000 gain ($9,000 - $8,000).

Question 6

Discuss the ways in which the estate and gift tax system is a unified system.

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The answer of Discuss the ways in which the estate...

Question 7

Ed gives Steve land with an adjusted basis of $40,000 and an FMV of $90,000.Ed paid no gift tax.Ed then inherits the same land back from Steve at Steve's death eight months later.At Steve's death,the land is worth $120,000.Ed's basis in the land becomes

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The answer of Ed gives Steve land with an adjusted...

Question 8

Miguel gives Roberta land with an adjusted basis of $50,000 and an FMV of $40,000.No gift tax is paid.Roberta sells the land for $36,000.Roberta recognizes

Accepted Answer

Roberta's basis in the land is the same as Miguel's adjusted basis of $50,000. Since she sold the land for $36,000, she incurred a loss of $14,000. However, since this was a gift, she can only deduct up to the FMV of the gift at the time of transfer, which was $40,000. Therefore, her deductible loss is limited to $4,000 ($40,000 - $36,000).

Question 9

On July 1,Frank loans his brother Matt $200,000.The loan is evidenced by an interest-free demand note.The loan is still outstanding on December 31.The applicable interest rate is 12%.Frank is treated as having made a gift of

Accepted Answer

Frank is treated as having made a gift of the forgone interest, not the principal amount of the loan. The forgone interest for 6 months (July to December) on $200,000 at 12% annually is $12,000 (200,000 * 12% * 6/12).

Question 10

Which of the following statements is true?

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The answer of Which of the following statements is true?
...

Question 11

On January 1,Jeff loans his friend Patrick $7,000 to buy a used car.Patrick signs a noninterest-bearing demand note.The applicable interest rate is 5%.Which of the following statements is correct?

Accepted Answer

Interest does not need to be imputed if the loan is less than $10,000 and there's no tax avoidance motive, according to IRS rules.

Question 12

Elaine loaned her brother,Mike,$175,000 to purchase a new home.Elaine does not charge Mike any interest on the loan.What are the tax consequences to Elaine and Mike?

Accepted Answer

Since Elaine did not charge Mike any interest on the loan, the IRS considers it a gift of the forgone interest. Elaine may need to file a gift tax return if the forgiven interest exceeds the annual exclusion amount. However, Mike does not have any tax consequences as he did not receive any taxable income from the loan. Option B is incorrect because imputed interest should be calculated on the entire loan amount, not just $75,000. Option C is incorrect because the gift tax rules are not affected by Mike's net investment income. Option D is incorrect as Mike cannot deduct the interest that he is deemed to have paid Elaine since he did not actually pay any interest.

Question 13

Gloria makes the following gifts during the year:  Before considering the unified credit,what are Gloria's taxable gifts?

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The answer of Gloria makes the following gifts during the...

Question 14

Which of the following situations requires that a gift tax return be filed?

Accepted Answer

Gift tax returns are generally required when a gift exceeds the annual exclusion amount (which is $16,000 for 2023) or does not qualify for an exclusion. Gifts between spouses (A) are generally not taxable due to the unlimited marital deduction. Gifts that do not exceed the annual exclusion amount (B) do not require a gift tax return. Direct payments for someone's medical bills (C) are excluded from gift tax. However, adding someone as a joint tenant on real property without receiving consideration in return (D) is considered a gift of half the property's value, likely exceeding the annual exclusion amount and requiring a gift tax return.

Question 15

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 16

In October 1976,Marian made a large taxable gift.It was her first gift.Marian used her $30,000 specific exemption to reduce her taxable gift amount.What impact does this gift have on her unified credit and death tax base?

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The answer of In October 1976,Marian made a large taxable...

Question 17

Jennifer and Terry,a married couple,live in Illinois; which is a common law state.In the current year,Terry gives his sister $200,000 cash.Jennifer and Terry agree to gift splitting.Neither Jennifer nor Terry has made any taxable gifts in prior years.What are Jennifer and Terry's taxable gifts?

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The answer of Jennifer and Terry,a married couple,live in Illinois;...

Question 18

Tracy gave stock with an adjusted basis of $18,000 and an FMV of $15,000 to her nephew Phil.No gift tax was paid.Phil sold the stock for $16,000.The gain or loss Phil will recognize on the sale is

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The answer of Tracy gave stock with an adjusted basis...

Question 19

Identify which of the following statements is true.

Accepted Answer

According to the tax law, if the gifted property's FMV on the date of the gift exceeds its adjusted basis and the donor pays no gift tax, the donee's basis is the same as the donor's basis if the property is sold for a loss. This is because the donor's appreciation in value is not taxed but also cannot be claimed by the donee.

Question 20

In 2014,Letty makes taxable gifts totaling $4 million.Her only other taxable gifts amount to $1 million,all of which were made in 2009.What is Letty's 2012 gift tax liability before the unified credit?

Accepted Answer

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Quiz 23: The Gift Tax