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Exam 25: Transfer Taxes and Wealth Planning

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Question 31

Multiple Choice

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At her death Emily owned real estate worth $2.5 million and other property worth $10 million.Property taxes of $200,000 were accrued on the real estate at the time of Emily's death.Which of the following is a true statement with respect to these items without considering any other owned property?

A) Emily's gross estate is $12.3 million.
B) Emily's taxable estate is $12.5 million.
C) Emily's adjusted gross estate is $12.3 million.
D) Emily's estate tax base is $12.5 million.
E) None of the choices are true.

F) All of the above
G) C) and E)

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Question 32

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Natalie transferred $500,000 of bonds to a revocable trust with directions to the trustee to pay income to her aunt for five years,after which the corpus is to be distributed to Natalie's niece.At year-end,the trustee paid $16,000 of income to the aunt.Which of the following is a true statement?

A) Natalie has made a complete gift of $500,000.
B) Natalie has made a taxable gift of $1,000.
C) Natalie has not made a complete gift because the trust is revocable.
D) Natalie has made a taxable gift of $16,000.
E) None of the choices are correct.

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

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Question 33

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Only complete gifts are subject to the federal gift tax.

Tracey is unmarried and owns $17 million in stock and bonds.What is the result if Tracey dies this year and leaves all of her property to a qualified charity?

Ricardo transferred $1,000,000 of cash to State University for a new sports complex.Calculate the amount of the taxable gift.

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?

Sophia is single and owns the following property: Sophia owns the real property in joint tenancy with Daniel.They purchased the property several years ago for $1 million.Sophia was only able to provide $200,000 of the purchase price.If Sophia dies,what is the amount of her gross estate?

This year Carlos and Hailey purchased realty for $480,000 and took title as equal tenants in common.However,Hailey was able to provide only $200,000 of the purchase price and Carlos paid the remaining $280,000.Has Carlos made a taxable gift to Hailey,and if so,in what amount?

A terminable interest in property is any interest that terminates during the current year.

No deductions are allowed when calculating the taxable estate.

The tax rate schedule on taxable transfers has a maximum tax rate of 40 percent.

Andrea transferred $500,000 of stock to a trust,with income to be paid to her niece for 20 years (value $125,000)and the remainder to be paid to her nephew (value $375,000).Andrea named a bank as independent trustee but retained the power to determine how much income,if any,will be paid in any particular year.What is the amount of the taxable gift,if any? Explain your answer.

Angel and Abigail are married and live in a common-law state.Angel and Abigail own a parcel of realty as joint tenants with the right of survivorship.In addition,Abigail owns another parcel of realty in her name alone.If Abigail should die when the jointly owned realty is worth $1 million and her own parcel of realty is worth $1.5 million,what is the total value of realty that would be included in Abigail's gross estate?

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

This year Evelyn created an irrevocable trust to provide for Ed,her 32-year-old nephew,and Ed's family.Evelyn transferred $150,000 to the trust and named a bank as the trustee.The trust was directed to pay income to Ed until he reaches age 35 (three years from now),and at that time the trust is to be terminated and the corpus is to be distributed to Ed's two children (or their estates).Determine the amount,if any,of the taxable gift.The relevant interest rate is 6 percent.(Round your intermediate calculation to three decimal places.)

Christopher's residence was damaged by a storm during the administration of his estate.Christopher's executor paid $120,000 to repair the residence after the storm.Which of the following is a true statement?

Which of the following is a true statement?

Gabriel had a taxable estate of $16 million when he died in 2019.Calculate the amount of estate tax due (if any)if Gabriel made prior taxable gifts in 2005 totaling $1 million,at which time he claimed an applicable credit of $1 million and paid no tax.Gabriel was unmarried at his death.(Use Exhibit 25-1.)

Joshua and David purchased real property for $500,000 as equal tenants in common.Although they are listed as equal co-owners,Joshua was only able to provide $200,000 of the purchase price.David treated the additional $100,000 of his contribution to the purchase price as a gift to Joshua.If the property is worth $2.5 million at Joshua's death,what amount would be included in Joshua's estate?

The amount of the estate tax is directly related to the amount of taxable gifts made in prior years.