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Exam 27: Family Tax Planning

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Question 1

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Match each statement with the correct choice. Some choices may be used more than once or not at all. a.In the current year, Debby, a widow, dies. Two years ago she inherited a large amount of wealth from her brother.b.Death does not defeat an owner's interest in property.c.Exists only if husband and wife are involved.d.A type of state tax on transfers by death.e.Must decrease the amount of the gross estate.f.Annual exclusion not allowed.g.Cumulative in effect.h.Right of survivorship present as to type of ownership.i.Avoids the terminable interest rule of the marital deduction.j.Exemption equivalent.k.Bypass amount.l.No correct match provided. -Tenancy by the entirety

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Question 2

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Paul,a U.S.citizen,will avoid the Federal estate tax if he becomes a Canadian resident and owns no property located in the U.S.at the time of his death.

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B) False

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Question 3

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Manfredo makes a donation of $50,000 to the church where he was baptized in Mexico City.The gift does not qualify as a charitable contribution for Federal income tax purposes.

For Federal estate and gift tax purposes,the exemption equivalent is the same thing as the exclusion amount.

What is the justification for the terminable interest rule that is applicable to the marital deduction?

Sidney dies and leaves property to his sister Giselle.Thirteen months later,Giselle dies.Under § 2013 (credit for tax on prior transfers),Giselle's estate can claim a full credit for any Federal estate taxes paid by Sidney's estate as to amounts passing to Giselle.

In 2013,Katherine made some taxable gifts upon which she paid a Federal gift tax of $96,000.If Katherine dies in 2015,the $96,000 is included in her gross estate under the "gross up" rule.

Classify each of the independent statements appearing below. a.Some or all of the interest included in the decedent's gross estate.b.None of the interest included in the decedent's gross estate. -Land held as tenants by the entirety with surviving spouse.Decedent provided none of the funds.

Classify each statement appearing below. a.No taxable transfer occurs b.Gift tax applies c.Estate tax applies -Using his own funds,Horace establishes a savings account designating ownership as follows: "Horace and Nadine as joint tenants with right of survivorship." Horace predeceases Nadine.

The current top Federal transfer tax rate of 40% is the highest rate ever imposed.

Classify each of the independent statements appearing below. a.Some or all of the interest included in the decedent's gross estate.b.None of the interest included in the decedent's gross estate. -Dower interest claimed by decedent's surviving spouse.

One of the reasons the estate tax was enacted was to prevent the avoidance of the gift tax by the making of "deathbed gifts."

At the time of his death,Jason was a participant in Silver Corporation's qualified pension plan and group term life insurance.The balance of the survivorship feature in his pension plan is: ​ Contributions by Silver $800,000 After-tax contributions by Jason 400,000 Plan earnings 300,000 ​ The term insurance has a maturity value of $100,000.All amounts are paid to Pam,Jason's daughter.One result of these transactions is:

A husband and wife make a gift of their jointly owned vacation home to their adult children.The gift-splitting election must be made.

Generally,property that passes to a surviving spouse that is not a U.S.citizen does not qualify for the marital deduction. a.Why? b.How can this result be avoided?

Classify each of the independent statements appearing below. a.Some or all of the interest included in the decedent's gross estate.b.None of the interest included in the decedent's gross estate. -Decedent owned a policy on the life of his spouse with himself as the designated beneficiary.The spouse survives.

Classify each of the independent statements appearing below. a.Some or all of the interest included in the decedent's gross estate.b.None of the interest included in the decedent's gross estate. -State income tax refund received after death on a tax return filed before death.

Match each statement with the correct choice. Some choices may be used more than once or not at all. a.In the current year, Debby, a widow, dies. Two years ago she inherited a large amount of wealth from her brother.b.Death does not defeat an owner's interest in property.c.Exists only if husband and wife are involved.d.A type of state tax on transfers by death.e.Must decrease the amount of the gross estate.f.Annual exclusion not allowed.g.Cumulative in effect.h.Right of survivorship present as to type of ownership.i.Avoids the terminable interest rule of the marital deduction.j.Exemption equivalent.k.Bypass amount.l.No correct match provided. -Future interest

In which,if any,of the following independent situations can the alternate valuation date be elected? Value of Gross Estate Estate Tax Result Date of Death Alternate Date Date of Death Alternate Date

Classify each statement appearing below. a.No taxable transfer occurs b.Gift tax applies c.Estate tax applies -In full settlement of her marital rights,Henry transfers property to his wife,Nancy.Three months later,Henry and Nancy are divorced.