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Exam 25: Transfer Taxes and Wealth Planning of the Cfa Institute

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Question 61

Multiple Choice

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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 these

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

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Question 62

True/False

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A trust is a legal entity whose purpose is to hold and administer property for beneficiaries.

A) True
B) False

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Question 63

Multiple Choice

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Chloe's gross estate consists of the following property valued at the date of death: Description $\quad\quad\quad\quad\quad$ Value Real estate $\quad\quad\quad\quad\quad \$ 5,500,000$ Cash, stock, and bonds $\quad1,700,000$ Personal property $\quad\quad\quad 300,000$ Chloe'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 true statement?

This year Brent purchased season baseball tickets in the exclusive sky club. The price of the tickets was $60,000, and Brent divided the tickets equally with his two brothers. Has Brent made a taxable gift and, if so, in what amount?

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 $5,000 in cash. What is the amount of the taxable gifts, if any, made by Samantha this year?

Isaac is married and wants to transfer the maximum amount of cash to each of his four children and six grandchildren. How much in total can Isaac transfer to his children and grandchildren each year without triggering any taxable gifts?

At her death Emily owned real estate worth $2.5 million and other property worth $1 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?

The testamentary transfer of property to a qualified charity is deductible in calculating the taxable estate without any ceiling limitation.

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?

Jonathan transferred $90,000 of cash to a trust this year for the benefit of Hannah, age 10. The trustee has the discretion to distribute income or corpus (principal) for Hannah's benefit and is required to distribute all assets to Hannah (or her estate) not later than Hannah's 21st birthday. What is the amount of the taxable gift?

Sophia is single and owns the following property: $\begin{array}{lr}{\text { Description }} & {\text { Value }} \\\text { Real estate property } & \$ 4,500,000 \\\text { Cash, stock, and bonds } & 2,800,000 \\\text { Personal property } & 300,000\end{array}$ 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?

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

Which of the following is a true statement?

The estate tax is imposed on testamentary transfers.

The tax rate schedule on taxable transfers has a maximum tax rate of 40% for 2014.

Which of the following is a true statement?

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

A completed gift must be irrevocably relinquished by the donor.

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

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