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Exam 18: The Federal Gift and Estate Taxes

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Question 101

True/False

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Peggy gives $200,000 to her grandson. This is an example of a direct skip for purposes of the GSTT (generation-skipping transfer tax).

A) True
B) False

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Question 102

Multiple Choice

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At the time of his death, Tom owned some common stock. The Citron Corporation stock is sold by the executor of the estate seven months after Tom's death for $1,300,000. If the alternate valuation date is properly elected, the value of Tom's estate as to these stocks is:

A) $2,300,000.
B) $2,400,000.
C) $2,500,000.
D) $2,700,000.
E) None of the above.

F) D) and E)
G) C) and D)

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Question 103

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Cliff loans his adult daughter, Stella, a large sum of money to enable her to start her own business. The loan is evidenced by a note, and no interest is provided for or repayment date specified. What are the potential tax ramifications of this arrangement to Cliff and Stella?

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. -Bank account held as joint tenant with mother. Mother provided all of the funds. Mother survives.

In 1992, Daniel and Mia acquire realty for $2 million, with Daniel furnishing $1.5 million of the purchase price and Mia providing the balance. Title to the property is listed as: "Daniel and Mia, joint tenants with right of survivorship." In 2013, Mia dies first when the realty is worth $4 million. How much is included in her gross estate under the following circumstances? a. Daniel and Mia are brother and sister. b. Daniel and Mia are husband and wife.

As reflected by the tax law, congressional policy relative to the Federal gift and estate taxes has been very inconsistent. Comment on this policy regarding the following time periods. a. From original enactment of these taxes up to the Tax Reform Act of 1976. b. From the Tax Reform Act of 1976 to EGTRRA. c. From EGTRRA to the Tax Relief Act (TRA) of 2010. d. From TRA of 2010 to ATRA of 2012.

The death of a tenant in common will defeat his or her interest in the property.

The use of the election to split gifts under § 2513 is not necessary for spouses who make gifts of their community property.

At the time of his death in 2013, Leroy owed Federal income taxes on income earned in 2011. Leroy's estate can claim an estate tax deduction for the income tax it pays.

Calvin's will passes $800,000 of cash to his widowed sister, Muriel. The estate tax attributable to the cash is $110,000. Muriel dies five years later, and the estate tax generated by the $800,000 is $100,000. How much of a credit for tax on prior transfers will Muriel's estate be allowed?

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. -Interest on municipal bonds accrued after death.

At the time of Dylan's death, he was a resident of the United States. He owns land located in a foreign country, which is subject to that country's death tax. This same land also can be subject to the Federal estate tax.

As a result of an auto accident from which she later died, Irene totaled a Bentley worth $95,000. If the insurance company covers $60,000 of the loss, Irene's estate can claim a casualty loss of $35,000 in arriving at the taxable estate.

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

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. -Exclusion amount

At one point, the tax rates applicable to transfers by gift were lower than those applying to transfers by death.

Reba purchases U.S. savings bonds which she lists in the name of Rod, Reba's son. The purchase of the bonds does not constitute a gift.

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 later withdraws all of the funds.

Classify each statement appropriately. a. Deductible from the gross estate in arriving at the taxable estate. b. Not deductible from the gross estate in arriving at the taxable estate. -Transportation cost for decedent and surviving son to site of burial.