Question 1

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 2

Manfredo makes a donation of $50,000 to the church where he was baptized in Mexico City.The gift does not qualify as a charitable contribution for Federal income tax purposes.

Accepted Answer

In order for a gift to qualify as a charitable contribution for Federal income tax purposes, it must be made to a qualified organization in the United States. Donations to organizations outside of the US do not qualify.

Question 3

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 4

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

Joint tenancy with right of survivorship means that if one owner dies, the other owner automatically inherits the deceased owner's share of the property. Therefore, if Lyle dies first, the entire value of the land will be included in his gross estate for federal estate tax purposes.

Question 5

At the time of his death in 2012,Leroy owed Federal income taxes on income earned in 2010.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

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 lists...

Question 7

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

This is true because when the policy owner dies and the death proceeds are paid out to the beneficiary, it is treated as a gift from the policy owner to the beneficiary.

Question 8

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,Raul...

Question 9

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

The transfer tax consequences only apply upon the death of the insured person, not the beneficiary. Therefore, Scarlet's prior death would not result in any transfer tax consequences for Georgia or anyone else.

Question 10

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 not included in Hal's gross estate and no deduction is allowed the estate.

Accepted Answer

Cemetery lots owned by the decedent for their own use or for the use of their family are considered exempt from the gross estate and no deduction is allowed for them.

Question 11

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 U.S. savings bonds are jointly held by Ray and Donna, upon Donna's death, the ownership of the savings bonds would automatically transfer to Ray as the surviving co-owner. There would be no gift or estate tax consequences as the ownership transfer would occur outside of Donna's estate.

Question 12

At the time of her death in 2012,Emma still owed $36,000 on her church pledge for the year.Because church pledges are not an enforceable obligation in the state where Emma resided,her estate cannot claim a deduction for the $36,000 it later pays.

Accepted Answer

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

Question 13

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 14

In his will,Hernando provides for $50,000 to go to the Madrid,Spain,school system.Because it is a foreign charity,the bequest will not qualify as a charitable deduction for estate tax purposes.

Accepted Answer

In the United States, bequests to foreign charities can qualify for the estate tax charitable deduction, provided the foreign organization meets certain requirements similar to those for domestic charities.

Question 15

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 special power of appointment.

Accepted Answer

The fact that Jody holds a special power of appointment gives him the right to determine how the trust's income is to be divided among Billie's children, as stated in the question.

Question 16

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 stated in IRS Publication 559, Survivors, Executors, and Administrators.

Question 17

All of the charitable organizations that qualify for estate tax purposes also qualify for income tax purposes.

Accepted Answer

The answer of All of the charitable organizations that qualify...

Question 18

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 liens on the property. In this case, the transfer of real estate worth $800,000 is subject to a mortgage of $200,000, resulting in a net transfer of $600,000. Therefore, Sally's estate is entitled to a marital deduction of $600,000.

Question 19

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

A general power of appointment allows the holder to direct the distribution of trust assets, and if not exercised, the value of the trust is still included in the holder's gross estate for estate tax purposes.

Question 20

Harry and Brenda are husband and wife.Using her funds,Brenda purchases real estate which she lists as: "Harry and Brenda,tenants by the entirety with right of survivorship." If Brenda dies first,all 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.Using...

Quiz 18: The Federal Gift and Estate Taxes