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Exam 25: Transfer Taxes and Wealth Planning

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Question 31

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Which of the following is a true statement?

A) A serial gift strategy works well even if the gifts don't qualify as present interests.
B) A serial gift strategy utilizes intervivos gifts to multiple donees over multiple years to maximize the annual exclusion.
C) The income tax savings from holding appreciated property until death is always outweighed by the additional estate tax imposed on the property.
D) A bypass trust avoids all estate taxes on the estate of the first spouse to die.
E) None of the choices are true.

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

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Question 32

True/False

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Property is included in the gross estate at the value a willing buyer would pay a willing seller, neither being under any compulsion to buy or to sell, and both having reasonable knowledge of the relevant facts.

A) True
B) False

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Question 33

Multiple Choice

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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?

Alexis transferred $400,000 to a trust with directions to pay income to her spouse, William, for his life. After William's death the corpus of the trust will pass to William's son. If the life estate is valued at $72,000, what is the total amount of the taxable gifts?

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?

The tax rate schedule on taxable transfers has a maximum tax rate of 40% for 2017.

Last year Diego transferred a life insurance policy worth $75,000 to an irrevocable trust with directions to distribute the corpus of the trust to his grandson, Juan, upon his graduation fromcollege, or to Juan's estate upon his death. Diego paid $5,000 of gift tax on the transfer of the policy. Early this year, Diego died and the insurance company paid $600,000 to the trust. What amount, if any, is included in Diego's gross estate?

At her death Serena owned real estate worth $210,000 with her spouse in joint tenancy with the right of survivorship. Serena contributed $50,000 to the original cost of the property and her spouse contributed the remaining $100,000. What amount, if any, is included in Serena's gross estate?

A fiduciary is a legal entity that can only exist for a year.

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?

This year Nicholas earned $500,000 and used it to purchase land in joint tenancy with a right ofsurvivorship with Nevaeh. Has Nicholas made a taxable gift to Nevaeh and, if so, in what amount?

The probate estate will include the total value of all real property owned by the decedent at the time of death regardless of whether the decedent co-owned the property as tenants in common or as joint tenants with the right of survivorship.

Which of the following is a true statement?

No deductions are allowed when calculating the taxable estate.

This year Don and his son purchased real estate for an investment. The price of the property was $500,000, and the title named Don and his son as joint tenants with theright of survivorship. Don provided $320,000 of the purchase price and his son provided the remaining $180,000. Has Don made a taxable gift and, if so, in what amount?

Isaac is married and Isaac and his spouse agree that they want to transfer the maximum amount of cash to each of their four children and six grandchildren. How much cash in total can Isaac and his spouse transfer to his children and grandchildren each year without creating any taxable gifts?

Ethan owned a vacation home at the time of his death. Which of the following is a true statement if Ethan was married to Emma and resided in a common law state at the time of his death?

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 ofrealty 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 beincluded in Abigail's gross estate?

The estate tax is imposed on testamentary transfers.

Aiden transferred $2 million to an irrevocable trust with income to Valeria for her life and the remainder to Jocelyn (or her estate). Calculate the value of the remainder and the life estate if Valeria's age and the prevailing interest rate result in a Table S discount factor for the remainder of0.47.