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Exam 25: Transfer Taxes and Wealth Planning

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Question 1

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

A) An applicable credit and a marital deduction.
B) A gift-splitting election and a deduction for income taxes paid by the fiduciary.
C) A charitable deduction and an annual exclusion.
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) A) and E)
G) D) and E)

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Question 2

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At her death Siena owned real estate worth $200,000 that was titled with her sister injoint 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, isincluded in Siena's gross estate?

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

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

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Question 3

Multiple Choice

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Which of the following is a true statement about the Federal gift tax return (Form 709) ?

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.

At his death in 2017, Nathan owned the following property: The real estate is subject to a $1,700,000 mortgage and Nathan made taxable gifts in 2009 totaling $2 million a which time he offset the gift tax with an applicable credit (exemption equivalent of $2 million). Nathanhas never been married. What is the amount of his estate tax due? (Use Exhibit 25-1)

Gabriel had a taxable estate of $6 million when he died in 2017. 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 Exhibit25-1)

Only complete gifts are subject to the Federal gift tax.

Chloe's gross estate consists of the following property valued at the date of death:Description ValueReal estate $5,500,000Cash, stock, and bonds 1,700,000Personal property 300,000Chloe's real estate is encumbered by a mortgage of $450,000, and Chloe's executor paid her funeral costs of $6,000 and charged fees for $24,000. Which of the following is a truestatement?

Jayden gave Olivia a ring when she agreed to marry him. The ring is a family heirloom valued at $67,000. What is the amount of the taxable gift?

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.

For the holidays, Samuel gave a necklace worth $35,000 to Jennifer and jewelry worth $44,000 to Savannah. Samuel is married to Wendy and they live in a community property state. Has Samuel made any taxable gifts and, if so, in what amounts?

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

The gift-splitting election only applies to gifts made by taxpayers who reside in community property states.

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?

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' 21st birthday and then pay him the corpus of the trust. Avaretained the power to require the trustee to pay income to Luis at any time, and 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?

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'sestate?

At her death Tricia owned a life insurance policy on her life that paid her daughter$500,000 upon her death. The policy was only valued at $25,000 prior to Tricia's death. What amount, if any, is included in Tricia's gross estate?

Which of the following transactions would not utilize the "Section 7520 rate" to calculate the value of the transfer?

The theft of property included in the gross estate is only deductible in calculating the taxable estate if the loss exceeds 10 percent of the decedent's adjusted gross estate.

The executor of Isabella's estate incurred administration expenses of $32,000 and paid$5,000 in funeral expenses. The executor charged the estate for $24,000 in fees. What is the maximum amount Isabella's estate can deduct in computing the adjusted gross estate?