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Exam 18: The Federal Gift and Estate Taxes

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Question 61

True/False

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Lila is the owner and beneficiary of a policy on the life of her husband, Austin. Upon Austin's death, the insurance proceeds paid to Lila do not qualify for the marital deduction.

A) True
B) False

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Question 62

Multiple Choice

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Match each statement with the correct choice. Some choices may be used more than once or not at all. -QTIP election

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) Overrides the terminable interest rule of the marital deduction.
J) Exemption equivalent.
K) Bypass amount.
L) No correct match provided.

M) H) and J)
N) E) and G)

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Question 63

Multiple Choice

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Classify each of the following independent statements:. -Bank account held as joint tenant with mother. Mother provided all of the funds. Mother survives.

At the time of her death, Megan: ∙ Owned an insurance policy on the life of her father with a replacement cost of $250,000 and maturity value of $800,000. The designated beneficiary of the policy is Megan's estate. ∙ Was an equal tenant in common with her brother in a tract of land worth $800,000. The land was inherited from their grandmother 10 years ago when it had a value of $200,000. ∙ Was a joint tenant with her two sisters in stock worth $1,500,000. The stock was inherited from their grandmother 10 years earlier when it had a value of $500,000. As to these transactions, Megan's gross estate must include:

In 2010, Drew creates an irrevocable trust with $1,000,000 of securities. Under the terms of the trust, Paula Drew's wife) is granted a life estate with remainder to their children. Drew makes a QTIP election as to the trust. Drew dies in 2012 when the trust is worth $1,500,000, and Paula dies in 2020 when the trust is worth $2,000,000. Which, if any, of the following is a correct statement?

Sandy pays a local college for her boyfriend's tuition. The payment is subject to the Federal gift tax.

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

Classify each of the following statements. -Howard establishes a trust, life estate to his children, remainder to the grandchildren. Under its terms, the trust is revocable by Howard. Howard later relinquishes the right to revoke the trust.

Under certain circumstances, the gift-splitting election can be made even though the electing spouses no longer are married to each other.

Using his separate funds, Wilbur purchases an annuity that pays him a specified amount until death. Upon Wilbur's death, a reduced amount is to be paid to Marcia for her life. Marcia predeceases Wilbur. Nothing concerning the annuity contract is included in Marcia's gross estate.

Georgia owns an insurance policy on the life of Jake with Scarlet as the designated beneficiary. Upon Scarlet's death, no Federal transfer tax consequences result.

In which, if any, of the following independent situations can the alternate valuation date be elected? $\begin{array}{cccc}&\text { Value of Gross Estate }&&\text { Estate Tax Result }\\&\text { Date of Death } & \text { Alternate Date } & \text { Date of Death } & \text { Alternate Date } \\a.&\$ 6,000,000 & \$ 6,100,000 & \$ 400,000 & \$ 390,000 \\b.&\$ 5,900,000 & \$ 5,800,000 & \$ 400,000 & \$ 405,000\\c.&\$ 6,100,000 & \$ 6,000,000 & \$ 390,000 & \$ 380,000 \\d.&\$ 6,200,000 & \$ 6,300,000 & \$ 500,000 & \$ 490,000\\\end{array}$

Classify each of the following statements: -Harry pays for the tuition for his niece to attend Derrick University. The niece does not qualify as Harry's dependent.

Ben and Lynn are married and have four preteen grandchildren. They want to contribute to a § 529 plan on behalf of their education. For 2019, what is the maximum amount they can transfer to the plan without making a taxable gift?

Lily pays for her grandson's college expenses. Under what conditions might such payments not constitute a gift?

Pursuant to Corey's will, Emma Corey's sister) inherits his property. Emma dies in a later tax year. The estate tax attributable to the inclusion of the property in Corey's gross estate was $300,000. The estate tax attributable to the inclusion of the property in Emma's gross estate is $400,000. Emma's credit for the tax on prior transfers is:

Classify each statement appropriately. -State income taxes accrued prior to death.

Match each statement with the correct choice. Some choices may be used more than once or not at all. -Tenancy by the entirety

Homer and Laura were husband and wife. At the time of Homer's death, they owned the following: land as tenants by the entirety worth $2,000,000 purchased by Homer) and stock as equal tenants in common worth $3,000,000 purchased by Laura) . Homer owned an insurance policy on his life maturity value of $1,000,000) with Laura as the designated beneficiary. Homer's will passes all his property to Laura. How much marital deduction is allowed Homer's estate?

The Federal unified transfer tax exclusion amount: