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At her death Siena owned real estate worth $200,000 that was titled with her sister in joint tenancy with the right of survivorship. Siena contributed $50,000 to the total cost of the property and her sister contributed the remaining $75,000. What amount, if any, is included in Siena's gross estate?


A) $50,000.
B) $125,000.
C) $80,000.
D) $100,000.
E) None of the choices are correct.

F) A) and C)
G) None of the above

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The applicable credit is designed to allow a minimum amount of lifetime transfers without triggering the imposition of a transfer tax.

A) True
B) False

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The generation-skipping tax is designed to accomplish which of the following?


A) Generate additional revenues to supplement the estate tax.
B) Prevent the avoidance of transfer taxes (both estate and gift tax) through transfers that skip a generation of recipients.
C) Eliminate the possibility that the estate tax can be avoided by gifts in contemplation of death.
D) Replace the gift tax on distributions from trusts.
E) None of the choices are correct.

F) All of the above
G) None of the above

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A gift tax return does not need to be filed unless the taxpayer has made current gifts in excess of the applicable credit.

A) True
B) False

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Which of the following is a true statement?


A) Executor's fees paid by an estate are deductible in computing the gross estate.
B) Funeral expenses for the decedent paid by an estate are deductible in computing the adjusted gross estate.
C) An executor can choose to deduct the decedent's funeral expenses on either the estate tax return or the estate's income tax return.
D) An executor can only deduct the costs of administering the decedent's estate on the estate's income tax return.
E) None of the choices are true.

F) B) and D)
G) B) and C)

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The federal transfer taxes are calculated using cumulative lifetime transfers.

A) True
B) False

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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.

A) True
B) False

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


A) the age of the life tenant.
B) the Section 7520 interest rate.
C) the value of the property at the time of the transfer.
D) the manner in which the trust corpus is invested.
E) All of these factors are utilized in the calculation of the value of a life estate in a trust.

F) A) and D)
G) All of the above

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Christian transferred $60,000 to an irrevocable trust for the benefit of his three daughters. The three daughters share income equally for five years and then the corpus of the trust is to be divided equally among them. What is the amount of the taxable gifts, if any, made by Christian?


A) $60,000.
B) $46,000.
C) $34,000.
D) $18,000.
E) None of the choices are correct-the amount of the taxable gifts cannot be ascertained without valuing each income interest.

F) None of the above
G) B) and C)

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E

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


A) An applicable credit and a marital deduction.
B) A charitable deduction and an annual exclusion.
C) A gift-splitting election and a deduction for income taxes paid by the fiduciary.
D) A charitable deduction and the unused spousal exemption equivalent.
E) All of these choices are characteristics common to both the gift and the estate tax.

F) B) and E)
G) C) and E)

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At his death Titus had a gross estate consisting of $6 million of property. Which of the following is a true statement about Titus' estate or estate tax?


A) Titus must have a probate estate of at least $6 million.
B) Titus must have an adjusted gross estate of at least $6 million.
C) Titus must have cumulative taxable transfers of at least $6 million.
D) Titus must have a tentative transfer tax calculated on at least $2 million of transfers.
E) None of the choices are necessarily true.

F) A) and D)
G) A) and C)

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E

Eric has $5 million of property that he wants to leave to his four children. He is considering making a current gift of the property (rather than leaving the property to pass through his will). Eric has made many prior taxable gifts, and additional taxable transfers will be subject to the highest transfer tax rate. Determine how much estate tax Eric will save if he gifts the property now and survives at least three years, during which time the property appreciates to $5.5 million. Ignore the time value of money in your calculation. (Use Exhibit 25-1.)

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$1,014,440.
The top transfer tax rate is...

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At his death Jose owned real estate worth $22 million but subject to a mortgage of $7 million. Which of the following is a true statement?


A) $22 million is included in Jose's gross estate.
B) $15 million is included in Jose's gross estate.
C) The $7 million mortgage must be paid by Jose's estate.
D) The $7 million mortgage is not deductible if Jose's will transfers the property to a charity.
E) All of the choices are correct.

F) D) and E)
G) A) and C)

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A withdrawal of money from a bank account held in joint tenancy with the right of survivorship may constitute a complete gift.

A) True
B) False

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


A) An applicable credit of up to $15,000 per donee per year reduces the tax on any transfer.
B) An annual exclusion offsets any transfer up to $15,000.
C) An election can be made to split a transfer between spouses.
D) A charitable and a marital deduction are allowed in computing the taxable transfer.
E) All of the choices are true.

F) None of the above
G) All of the above

Correct Answer

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Proceeds of life insurance paid due to the death of the decedent are included in the decedent's gross estate if the decedent had the right to designate the beneficiary of the policy.

A) True
B) False

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Harold and Mary are married and live in a community-property state. During the marriage Harold bought a parcel of real estate for $100,000 in community funds and titled the property in his name alone. Mary died on January 30th of this year and was survived by Harold, who did not remarry. The parcel of real property was worth $250,000 on January 30th of this year but was only worth $220,000 at year-end. What amount, if any, is included in Mary's gross estate?


A) $250,000.
B) $220,000.
C) $125,000.
D) $110,000.
E) zero-Mary had no ownership interest in the property at her death.

F) A) and E)
G) A) and B)

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

A) True
B) False

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Which of the following is a true statement?


A) A fiduciary entity is a legal entity that takes possession of property for the benefit of a person.
B) An estate is a fiduciary entity that comes into existence upon a person's death to transfer the decedent's real and personal property.
C) A trust is also a fiduciary entity whose purpose is to hold and administer the corpus for other persons (beneficiaries) .
D) An estate exists only temporarily, but a trust may have a prolonged or even indefinite existence.
E) All of the choices are true.

F) All of the above
G) B) and D)

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E

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

A) True
B) False

Correct Answer

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