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Exam 25: Transfer Taxes and Wealth Planning

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Question 41

True/False

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The annual exclusion eliminates relatively small transfers of present interests in property.

A) True
B) False

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Question 42

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In order for a transfer to be treated as a complete gift,the transfer must be irrevocably relinquished by the donor.

A) True
B) False

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Question 43

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

Madison was married at the time of her death and her gross estate consisted of $22 million in stock and bonds.Madison left all of her property to her spouse.What is the result?

This year Samantha gave each of her three nephews birthday gifts of $10,000 in cash.At Christmas,Samantha gave each of her three nephews Christmas gifts of an additional $6,000 in cash.What is the amount of the taxable gifts,if any,made by Samantha this year?

Ava transferred $1.5 million of real estate into an irrevocable trust for her son,Luis.The trustee was directed to retain income until Luis' 21^st birthday and then pay him the corpus of the trust.Ava retained the power to require the trustee to pay income to Luis at any time,and retained the right to the assets if Luis predeceased her.What amount of the trust,if any,will be included in Ava's estate if she died shortly after making the transfer?

This year Nathan transferred $7 million to an irrevocable trust established for the benefit of his nephew.The trustee is directed to accumulate income for the next five years before distributing the trust corpus to Nathan's nephew.In past years Nathan has made taxable gifts of $6 million and used an applicable credit on an exemption equivalent of $5 million.What amount of gift tax,if any,must Nathan remit?

Which of the following is a true statement?

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.)

A future interest is a right to receive income or property in the future.

This year Maria transferred $600,000 to an irrevocable trust that pays equal shares of income annually to four cousins (or their estates)for the next eight years.At that time,the trust is terminated and the corpus of the trust reverts to Maria.Determine the amount,if any,of the current gifts and the taxable gifts if the relevant interest rate is 6 percent and Maria is married and elects to gift-split with her spouse?

The debts of the decedent at the time of death are deducted in calculating the taxable estate.

The estate tax is imposed on testamentary transfers.

When creating an estate tax planning strategy,the income tax benefit derived from a step-up in tax basis on assets should be measured against the estate tax cost of including the assets in the decedent's gross estate.

James and Jasmine live in a community-property state.This year they transferred $800,000 of property to an irrevocable trust that provides their son,Aaron,a life estate and their daughter,Lauren,the remainder.At the time of the gift,the Table S value for Aaron was .18031.What is the amount,if any,of the taxable gifts?

Adrian owns two parcels of real estate.Parcel #1 is worth $400,000 and Parcel #2 is worth $660,000.Adrian plans to bequeath Parcel #1 directly to his spouse,Sofia,and leave her a life estate in Parcel #2.What amounts will be included in Adrian's taxable estate for these two parcels?

A serial gift strategy consists of arranging a trust to maximize the value of the applicable credit.

The gift tax is imposed on inter vivos (lifetime)transfers.

At his death Stanley owned real estate worth $345,000 with two other individuals as equal tenants in common.Stanley contributed $50,000 to the $100,000 total cost of the property.What amount,if any,is included in Stanley's gross estate?

Caleb transferred $115,000 to an irrevocable trust for Avery.The trustee has the discretion to distribute income or corpus for Avery's benefit but is required to distribute all assets to Avery (or his estate)not later than Avery's 21^st birthday.What is the amount,if any,of the taxable gift?