Question 1

Classify each of the independent statements appearing below.
a. Some or all of the interest included in the decedent's gross estate.
b. None of the interest included in the decedent's gross estate.
-Interest on municipal bonds accrued after death.

Accepted Answer

Interest on municipal bonds accrued after the death of the bondholder is not considered part of the decedent's gross estate. The estate includes assets and interests the decedent owned at the time of death, and since the interest accrues after death, it is not included.

Question 2

Classify each statement appearing below.
a. No taxable transfer occurs
b. Gift tax applies
c. Estate tax applies
-Homer purchases a U.S. savings bond listing title as: "Homer, payable to Bernice upon Homer's death." Bernice is Homer's sister.

Accepted Answer

When Homer purchases a U.S. savings bond and lists it as "Homer, payable to Bernice upon Homer's death," no taxable transfer occurs immediately. The transfer of ownership will only occur upon Homer's death, and at that point, it may be subject to estate tax, not gift tax, depending on the value of Homer's estate and the tax laws in effect at the time of his death. However, the statement does not directly involve estate tax applicability at the time of purchase.

Question 3

Classify each statement appearing below.
a. No taxable transfer occurs
b. Gift tax applies
c. Estate tax applies
-Darlene holds a special power of appointment over the income from a trust created by her brother. During the year, Darlene exercises the power in favor of one of the beneficiaries designated in the trust instrument.

Accepted Answer

The answer of Classify each statement appearing below.
a. No taxable...

Question 4

Classify each statement appearing below.
a. No taxable transfer occurs
b. Gift tax applies
c. Estate tax applies
-Using his own funds, Horace establishes a savings account designating ownership as follows: "Horace and Nadine as joint tenants with right of survivorship." Horace later withdraws all of the funds.

Accepted Answer

When Horace establishes a savings account with Nadine as joint tenants with right of survivorship using his own funds and later withdraws all the funds, no taxable transfer occurs because the funds remain under his control and ownership. The designation of joint tenancy with right of survivorship does not constitute a completed gift for tax purposes until Horace's death or unless Nadine withdraws funds.

Question 5

Classify each statement appearing below.
a. No taxable transfer occurs
b. Gift tax applies
c. Estate tax applies
-Cash donation to the reelection campaign of a member of the U.S. Congress.

Accepted Answer

The answer of Classify each statement appearing below.
a. No taxable...

Question 6

Classify each statement appearing below.
a. No taxable transfer occurs
b. Gift tax applies
c. Estate tax applies
-Howard establishes a trust, life estate to his children, remainder to the grandchildren. Under its terms, the trust is revocable by Howard.

Accepted Answer

The answer of Classify each statement appearing below.
a. No taxable...

Question 7

Classify each statement appearing below.
a. No taxable transfer occurs
b. Gift tax applies
c. Estate tax applies
-Under her father's will, Faith is to receive 10,000 shares of GE common stock. Eight months after her father's death, Faith disclaims the 10,000 shares.

Accepted Answer

The answer of Classify each statement appearing below.
a. No taxable...

Question 8

Classify each statement appearing below.
a. No taxable transfer occurs
b. Gift tax applies
c. Estate tax applies
-Darlene holds a general power of appointment over the income from a trust created by her brother. Darlene dies during the year without having exercised the power. The income is distributed to children of the brother in accordance with the terms of the trust instrument.

Accepted Answer

The answer of Classify each statement appearing below.
a. No taxable...

Question 9

Classify each statement appearing below.
a. No taxable transfer occurs
b. Gift tax applies
c. Estate tax applies
-Van takes out an insurance policy on Myrna's life and designates himself as the beneficiary. Myrna is Van's wife. Two years later, Myrna dies, and Van collects the insurance proceeds.

Accepted Answer

The answer of Classify each statement appearing below.
a. No taxable...

Question 10

Classify each statement appearing below.
a. No taxable transfer occurs
b. Gift tax applies
c. Estate tax applies
-Homer purchases a U.S. savings bond listing title as: "Homer, payable to Bernice upon Homer's death." Bernice is Homer's sister. Homer dies four years later, and Bernice cashes in the bond and keeps the proceeds.

Accepted Answer

Estate tax applies because the transfer of the bond's ownership occurs due to Homer's death, and it becomes part of his estate before it is transferred to Bernice.

Question 11

Classify each statement appearing below.
a. No taxable transfer occurs
b. Gift tax applies
c. Estate tax applies
-Meg gives her 18-year-old son money for his college tuition and living expenses (e.g., room and board).

Accepted Answer

Payments made directly to an educational institution for tuition or to a provider for medical expenses on behalf of another person are not considered taxable gifts under U.S. tax law. Since the question specifies the money is for college tuition and living expenses, it's considered support, not a taxable gift. Estate tax does not apply as it is concerned with transfers of estate after death.

Question 12

Classify each statement appearing below.
a. No taxable transfer occurs
b. Gift tax applies
c. Estate tax applies
-Maggie purchased an insurance policy on Jim's life and designated Susan as the beneficiary.

Accepted Answer

When Maggie purchases an insurance policy on Jim's life and designates Susan as the beneficiary, no taxable transfer occurs at the time of purchase. Gift and estate taxes typically apply to transfers of wealth either during an individual's life or at their death, but the act of purchasing an insurance policy for the benefit of another does not constitute a taxable transfer under these categories at the time of purchase.

Question 13

Classify each statement appearing below.
a. No taxable transfer occurs
b. Gift tax applies
c. Estate tax applies
-Van takes out an insurance policy on his life and designates his estate as the beneficiary. Van dies four years later.

Accepted Answer

The answer of Classify each statement appearing below.
a. No taxable...

Question 14

Classify each statement appearing below.
a. No taxable transfer occurs
b. Gift tax applies
c. Estate tax applies
-Under her father's will, Faith is to receive 10,000 shares of GE common stock. Ten months after her father's death, Faith disclaims 10,000 shares.

Accepted Answer

The answer of Classify each statement appearing below.
a. No taxable...

Question 15

Classify each statement appearing below.
a. No taxable transfer occurs
b. Gift tax applies
c. Estate tax applies
-Clarence pays the medical providers (e.g., physicians, hospital) for his aunt's gall bladder operation. The aunt does not qualify as Clarence's dependent.

Accepted Answer

The answer of Classify each statement appearing below.
a. No taxable...

Question 16

Classify each statement appearing below.
a. No taxable transfer occurs
b. Gift tax applies
c. Estate tax applies
-Using his own funds, Horace establishes a savings account designating ownership as follows: "Horace and Nadine as joint tenants with right of survivorship." Horace predeceases Nadine.

Accepted Answer

The answer of Classify each statement appearing below.
a. No taxable...

Question 17

Classify each statement appearing below.
a. No taxable transfer occurs
b. Gift tax applies
c. Estate tax applies
-Using his own funds, Horace establishes a savings account designating ownership as follows: "Horace and Nadine as joint tenants with right of survivorship." Nadine predeceases Horace.

Accepted Answer

When Horace establishes a savings account with Nadine as joint tenants with right of survivorship and Nadine predeceases Horace, no taxable transfer occurs because the entire property automatically passes to Horace by operation of law, without going through probate or being subject to estate or gift tax at the time of Nadine's death.

Question 18

Classify each statement appearing below.
a. No taxable transfer occurs
b. Gift tax applies
c. Estate tax applies
-Maggie purchased an insurance policy on Jim's life and designated Susan as the beneficiary. Four years later Jim dies, and Susan collects the insurance proceeds.

Accepted Answer

The answer of Classify each statement appearing below.
a. No taxable...

Question 19

Classify each statement appearing below.
a. No taxable transfer occurs
b. Gift tax applies
c. Estate tax applies
-Howard establishes a trust, life estate to his children, remainder to the grandchildren. Under its terms, the trust is revocable by Howard. Howard later relinquishes the right to revoke the trust.

Accepted Answer

When Howard relinquishes the right to revoke the trust, he is making a completed gift for gift tax purposes, as he is giving up control over the trust assets, thereby causing gift tax to apply.

Question 20

Classify each of the independent statements appearing below.
a. Some or all of the interest included in the decedent's gross estate.
b. None of the interest included in the decedent's gross estate.
-Cash dividends on stock owned by the decedent (declaration and record dates preceded death but payment date was after death).

Accepted Answer

The answer of Classify each of the independent statements appearing...

Quiz 18: The Federal Gift and Estate Taxes

Classify each of the independent statements appearing below. a. Some or all of the interest included in the decedent's gross estate. b. None of the interest included in the decedent's gross estate. -Interest on municipal bonds accrued after death.

Classify each statement appearing below. a. No taxable transfer occurs b. Gift tax applies c. Estate tax applies -Homer purchases a U.S. savings bond listing title as: "Homer, payable to Bernice upon Homer's death." Bernice is Homer's sister.

Classify each statement appearing below. a. No taxable transfer occurs b. Gift tax applies c. Estate tax applies -Cash donation to the reelection campaign of a member of the U.S. Congress.

Classify each statement appearing below. a. No taxable transfer occurs b. Gift tax applies c. Estate tax applies -Howard establishes a trust, life estate to his children, remainder to the grandchildren. Under its terms, the trust is revocable by Howard.

Classify each statement appearing below. a. No taxable transfer occurs b. Gift tax applies c. Estate tax applies -Under her father's will, Faith is to receive 10,000 shares of GE common stock. Eight months after her father's death, Faith disclaims the 10,000 shares.

Classify each statement appearing below. a. No taxable transfer occurs b. Gift tax applies c. Estate tax applies -Van takes out an insurance policy on Myrna's life and designates himself as the beneficiary. Myrna is Van's wife. Two years later, Myrna dies, and Van collects the insurance proceeds.

Classify each statement appearing below. a. No taxable transfer occurs b. Gift tax applies c. Estate tax applies -Meg gives her 18-year-old son money for his college tuition and living expenses (e.g., room and board).

Classify each statement appearing below. a. No taxable transfer occurs b. Gift tax applies c. Estate tax applies -Maggie purchased an insurance policy on Jim's life and designated Susan as the beneficiary.

Classify each statement appearing below. a. No taxable transfer occurs b. Gift tax applies c. Estate tax applies -Van takes out an insurance policy on his life and designates his estate as the beneficiary. Van dies four years later.

Classify each statement appearing below. a. No taxable transfer occurs b. Gift tax applies c. Estate tax applies -Under her father's will, Faith is to receive 10,000 shares of GE common stock. Ten months after her father's death, Faith disclaims 10,000 shares.

Classify each statement appearing below. a. No taxable transfer occurs b. Gift tax applies c. Estate tax applies -Clarence pays the medical providers (e.g., physicians, hospital) for his aunt's gall bladder operation. The aunt does not qualify as Clarence's dependent.

Classify each statement appearing below. a. No taxable transfer occurs b. Gift tax applies c. Estate tax applies -Using his own funds, Horace establishes a savings account designating ownership as follows: "Horace and Nadine as joint tenants with right of survivorship." Horace predeceases Nadine.

Classify each statement appearing below. a. No taxable transfer occurs b. Gift tax applies c. Estate tax applies -Using his own funds, Horace establishes a savings account designating ownership as follows: "Horace and Nadine as joint tenants with right of survivorship." Nadine predeceases Horace.

Classify each statement appearing below. a. No taxable transfer occurs b. Gift tax applies c. Estate tax applies -Maggie purchased an insurance policy on Jim's life and designated Susan as the beneficiary. Four years later Jim dies, and Susan collects the insurance proceeds.