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Exam 25: Transfer Taxes and Wealth Planning

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Question 1

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Including adjusted taxable gifts in the taxable estate causes these gifts to be taxed twice, once under the gift tax and again under the estate tax.

A) True
B) False

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Question 2

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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 of 0.47.

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The remainder value is $940,000 and the ...

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Question 3

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The tax rate schedule on taxable transfers has a maximum tax rate of 40% for 2018.

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

Natalie transferred $500,000 of bonds to a revocable trust with directions to the trustee to pay income to her aunt for five years after which the corpus is to be distributed to Natalie's niece. At year end, the trustee paid $16,000 of income to the aunt. Which of the following is a true statement?

Only complete gifts are subject to the Federal gift tax.

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 the right 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?

The gross estate always includes the value of half of any real property owned by a decedent and another person in joint tenancy with the right of survivorship.

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

James and Jasmine live in a community property state. This year they transferred $800,000 of property to an irrevocable trust that provides their son, Aaron, a life estate and their daughter, Lauren, the remainder. At the time of the gift, the Table S value for Aaron was .18031. What is the amount, if any, of the taxable gifts?

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 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?

The estate tax is imposed on testamentary transfers.

Both spouses must consent to any gift-splitting election.

An applicable credit is subtracted in calculating both the gift tax and the estate tax. Why doesn't this calculation have the effect of increasing the total applicable credit amount?

Jayden gave Olivia a ring when she agreed to marry him. The ring is a family heirloom valued at $68,000. What is the amount of the taxable gift?

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.

Adrian owns two parcels of real estate. Parcel #1 is worth $400,000 and Parcel #2 is worth $660,000. Adrian plans to bequeath Parcel #1 directly to his spouse Sofia and leave her a life estate in Parcel #2. What amounts will be included in Adrian's taxable estate for these two parcels?

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.

Which of the following transfers is a completed gift?