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Exam 27: The Federal Gift and Estate Taxes

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Question 51

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At the time of his death,Jason was a participant in Silver Corporation's qualified pension plan and group term life insurance.The balance in his pension plan is: 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) Pam must pay income tax on $300,000.
B) Pam must pay income tax on $1,100,000.
C) Jason's gross estate must include $1,100,000.
D) Jason's gross estate must include $1,500,000.
E) None of the above.

F) A) and E)
G) A) and D)

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Question 52

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At the time of her death in 2009,Emma still owed $36,000 on her church pledge for the year.If church pledges are not an enforceable obligation in the state where Emma resided,her estate cannot claim a deduction for the $36,000 it later pays.

A) True
B) False

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Question 53

Multiple Choice

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Which of the following statements relating to the Federal gift tax is incorrect?

Mitch pays the surgeon and the hospital for his aunt's gall bladder operation.If the aunt is not Mitch's dependent,the transfer is subject to the gift tax.

In 1985,Thalia purchases land for $900,000 and lists title in the names of her daughters as follows: "April and Theresa,joint tenants with right of survivorship." In 1990,April and Theresa purchase an apartment building for $1 million as equal tenants in common;April furnished $400,000 and Theresa furnished $600,000 of the cost.In the current year,April dies first in 2009 when the land is worth $1.5 million and the apartment building is worth $2 million.One of the results of these transactions is:

At the time of his death,Norton was involved in the following transactions. What amount is included in Norton's gross estate?

Cary and Bo are husband and wife.Using their community funds,they create a trust,life estate to Bo,remainder to their children.Four years later,Cary predeceases Bo.Nothing as to this trust is included in Cary's gross estate.

Sometimes also known as transaction taxes,Federal gift and estate taxes are excise taxes.

In determining whether a dividend issued on stock held by a decedent is included in the gross estate,the record date (rather than the declaration or payment dates)controls.

In arriving at the taxable estate,expenses incurred in administering community property are deductible only in proportion to the deceased spouse's interest in the community.

Waldo is his mother's sole heir and is the designated executor of her estate.Although the alternate valuation date would yield a smaller gross estate and less estate tax liability,the § 2032 election is not made.Instead,Waldo files a Form 706 for his mother's estate using higher date of death values.Why?

Which,if any,of the following statements correctly reflects the rules applicable to the alternate valuation date ?

A timely issued disclaimer by an heir transfers the property to someone else without a Federal gift tax result.

Lyle and Beatrice are brother and sister.Using his funds,Lyle purchases land,listing title as: "Lyle and Beatrice,joint tenants with right of survivorship." If Lyle dies first,all of the land is included in his gross estate.

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.

Martha inherits unimproved land (fair market value of $3 million) from her father on June 1,2008.Martha disclaims her interest in the property as follows: one-third on December 1,2008;one-third on January 1,2009;and the remaining one-third on May 31,2009.In all cases,the disclaimers pass the interest to her son (the next heir under state law) .The Federal gift tax applies to Martha for:

Which of the following is not a characteristic of both the Federal gift tax and the Federal estate tax?

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

In community property states,all property acquired after marriage by either spouse is community property.

An estate tax is a tax on the right of an heir to receive property on the death of the owner.