Question 1

Under the terms of a trust created by Billie, Jody (Billie's brother) has the right to determine how its income is to be divided among Billie's children. Jody holds a general power of appointment.

Accepted Answer

A general power of appointment allows the holder to appoint the trust property to themselves, their creditors, their estate, or the creditors of their estate. Jody's power is limited to distributing income among Billie's children, which is a special or limited power of appointment, not a general one.

Question 2

Sally's will passes real estate to Otto (her surviving spouse). The real estate is worth $800,000 but is subject to a mortgage of $200,000. The transfer provides Sally's estate with a marital deduction of $600,000.

Accepted Answer

The marital deduction is equal to the value of the property transferred to the surviving spouse, minus any outstanding mortgages or other debts on the property. In this case, the transfer of the $800,000 property minus the $200,000 mortgage leaves a value of $600,000, which is the amount of the marital deduction.

Question 3

In arriving at the taxable estate, expenses incurred in administering community property are deductible only in proportion to the deceased spouse's interest in the community.

Accepted Answer

This is because community property is owned equally by both spouses, and expenses related to its administration can only be deducted based on the deceased spouse's share of the property.

Question 4

At the time of her death, Abigail held a general power of appointment over a trust created by her grandmother in 1990. Since Abigail never exercised the general power, none of the trust is included in her gross estate.

Accepted Answer

The answer of At the time of her death, Abigail...

Question 5

At the time of his death in 2011, Leroy owed Federal income taxes on income earned in 2009. Leroy's estate cannot claim an estate tax deduction for the income tax it pays.

Accepted Answer

The answer of At the time of his death in...

Question 6

Harry and Brenda are husband and wife. Using his funds, Harry purchases real estate which he lists as: "Harry and Brenda, tenants by the entirety with right of survivorship." If Brenda dies first, none of the value of the real estate will be included in her gross estate.

Accepted Answer

The answer of Harry and Brenda are husband and wife....

Question 7

Manfredo makes a donation of $50,000 to the church where he was baptized in Mexico City. The gift does qualify as a charitable contribution for Federal income tax purposes.

Accepted Answer

For a donation to qualify as a charitable contribution for U.S. Federal income tax purposes, it must be made to a qualified organization recognized by the IRS, typically within the United States. A church in Mexico City would not qualify unless it meets specific IRS criteria for foreign organizations.

Question 8

Ray purchases U.S. savings bonds which he lists as "Ray and Donna" as co-owners. Donna is Ray's daughter. Donna predeceases Ray. No gift or estate tax consequences result from this situation.

Accepted Answer

Since the savings bonds were owned as "Ray and Donna" with right of survivorship, the bonds pass to Ray upon Donna's death without gift or estate tax consequences.

Question 9

Some of the charitable organizations that qualify for estate tax purposes do not qualify for income tax purposes.

Accepted Answer

This is true. The rules and regulations for qualifying as a charitable organization for estate tax purposes is different than for income tax purposes. Therefore, some organizations may only qualify for one and not the other.

Question 10

Reba purchases U.S. savings bonds which she lists in the name of Rod, Reba's son. The purchase of the bonds does not constitute a gift.

Accepted Answer

The answer of Reba purchases U.S. savings bonds which she...

Question 11

At the time of his death, Hal owned 10 cemetery lots worth $40,000 ($4,000 each) for use by himself and his family. These lots are included in Hal's gross estate and a deduction of $4,000 is allowed the estate.

Accepted Answer

The answer of At the time of his death, Hal...

Question 12

At the time of her death in 2011, Emma still owed $36,000 on her church pledge for the year. Even if church pledges are not an enforceable obligation in the state where Emma resided, her estate can claim a deduction for the $36,000 it later pays.

Accepted Answer

Even though church pledges may not be legally enforceable in some states, they are considered charitable donations, and if paid by the estate, they are deductible on the estate tax return.

Question 13

As a result of an auto accident from which she later died, Irene totaled a Bentley worth $95,000. If the insurance company covers $60,000 of the loss, Irene's estate can claim a deduction of $35,000 in arriving at the taxable estate.

Accepted Answer

The answer of As a result of an auto accident...

Question 14

The purpose of the marital deduction is to place married decedents in common law states on par with those in community property jurisdictions.

Accepted Answer

The answer of The purpose of the marital deduction is...

Question 15

At the time of his prior death, Raul owned a residence with his wife, Manuela, as tenants by the entirety. The residence was purchased by Manuela ten years ago at a cost of $300,000 and has a fair market value of $1.4 million. Raul's estate will be allowed no marital deduction as to the property.

Accepted Answer

The answer of At the time of his prior death,...

Question 16

Georgia owns an insurance policy on the life of Jake, with Scarlet as the designated beneficiary. Upon Scarlet's prior death, no transfer tax consequences result.

Accepted Answer

If the designated beneficiary predeceases the insured, the death benefit will go to the insured's estate and be subject to transfer taxes, but there are no transfer tax consequences for the designated beneficiary's prior death in this scenario.

Question 17

Frank owns an insurance policy on the life of Cynthia, with Leon as the designated beneficiary. Upon Cynthia's prior death, Frank is treated as making a gift of the insurance proceeds to Leon.

Accepted Answer

When Frank owns an insurance policy on someone else's life and designates someone else as the beneficiary, upon the insured's prior death, the policy proceeds are considered a gift from the owner to the beneficiary.

Question 18

Rachel owns an insurance policy on the life of Albert with Belle as the designated beneficiary. Upon Rachel's prior death, nothing regarding this policy is included in her gross estate.

Accepted Answer

The answer of Rachel owns an insurance policy on the...

Question 19

In his will, Hernando provides for $50,000 to go to the Madrid, Spain, school system. Even though it is a foreign charity, the bequest will qualify as a charitable deduction for estate tax purposes.

Accepted Answer

Charitable contributions to foreign organizations can qualify for a charitable deduction if they meet certain criteria, including being an organization that would qualify if it were in the United States and having a specific connection to the United States. It is important to consult with a tax professional to ensure that the bequest meets all necessary requirements.

Question 20

Lyle and Beatrice are brother and sister. Using his funds, Lyle purchases land, listing title as: "Lyle and Beatrice, joint tenants with right of survivorship." If Lyle dies first, all of the land is included in his gross estate.

Accepted Answer

With joint tenancy with right of survivorship, the surviving joint tenant automatically inherits the deceased joint tenant's share of the property. Since Lyle and Beatrice are joint tenants, if Lyle dies first, Beatrice would inherit his share of the land and it would be included in Lyle's gross estate.

Quiz 18: The Federal Gift and Estate Taxes