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Exam 25: Transfer Taxes and Wealth Planning

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Question 1

True/False

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The marital and charitable deductions are common to both the estate tax and the gift tax formulas.

A) True
B) False

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Question 2

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The gross estate will not include the value of clothes and other personal items owned by the decedent at the time of death.

A) True
B) False

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Question 3

Multiple Choice

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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?

A gratuitous transfer of property made during the lifetime of the donor is called:

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?

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

This year Alex's friend, Kimberly, was disabled. Alex paid $25,000 to Kimberly's doctor for medical expenses. In addition, Alex also paid $15,000 to Kimberly so that her son could afford tuition at State University this year. Has Alex made taxable gifts, and if so, in what amounts?

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

Grace transferred $800,000 into trust with the income to be paid annually to her spouse, Isaiah, for life and the remainder to Taylor. Calculate the amount of the taxable gifts from the transfers.

No deductions are allowed when calculating the taxable estate.

An exemption equivalent is the amount of annual gifts that is automatically exempt from the gift tax.

Matthew and Addison are married and live in Michigan, a common-law state. For the holidays Addison gave cash gifts of $30,000 to each of her two sons, and Matthew gave $40,000 to his daughter. What is the amount of Addison's taxable gifts if Matthew and Addison opt to gift split?

Which of the following is a true statement?

A gratuitous transfer of cash to an individual who uses the cash to pay medical expenses is not subject to a gift tax.

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

For 2016, the exemption equivalent for the estate tax is $5.45 million.

The Federal transfer taxes are calculated using cumulative lifetime transfers.

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

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?

At his death in 2016, 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 at which time he offset the gift tax with a unified credit (exemption equivalent of $2 million). Nathan has never been married. What is the amount of his estate tax due?