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Exam 18: The Federal Gift and Estate Taxes

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Question 51

Multiple Choice

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Concerning the formula for the Federal estate tax, which, if any, of the following statements is correct?

A) To arrive at the taxable estate, add only post-1976 taxable gifts.
B) The estate tax due is determined by applying the unified transfer tax rate to the taxable estate.
C) In determining the estate tax due, one of the credits allowed is for state death taxes paid.
D) In determining the estate tax due, a credit is allowed for gift taxes paid (or deemed paid) on post-1976 taxable gifts.
E) None of the above statements is correct.

F) A) and B)
G) B) and E)

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Question 52

True/False

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A majority of states currently do not impose any tax on transfers by death.

A) True
B) False

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Question 53

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The U.S. has death tax conventions (i.e., treaties) with most of the countries of the world.

Iris dies intestate (i.e., without a will). All of her property passes to her heirs in accordance with the order of distribution prescribed under applicable state law.

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

In 2005, 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 2007, 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. April dies first in 2015 when the land is worth $1.5 million and the apartment building is worth $2 million. One of the results of these transactions is:

For gift tax purposes, a property settlement in consideration of marriage (i.e., prenuptial agreement) is treated the same as a property settlement incident to a divorce.

Under the alternate valuation date election, each asset in the gross estate is valued at the lesser of the date of death value or six months thereafter.

Classify each statement appearing below -Homer purchases a U.S. savings bond listing title as: "Homer, payable to Bernice upon Homer's death." Bernice is Homer's sister. Homer dies four years later, and Bernice cashes in the bond and keeps the proceeds.

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

In which, if any, of the following independent situations has Jean made a gift?

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. Marcia predeceases Wilbur. Nothing concerning the annuity contract is included in Marcia's gross estate.

Classify each statement appropriately -Casualty loss to property before the death of the owner.

Classify each of the independent statements appearing below -Note receivable issued by a grandson and forgiven by the decedent in her will.

At the time of his death on August 7, Michael owned the following assets. ∙ Green Corporation stock (cost $700,000, FMV $950,000). On July 20, Green declared a cash dividend, payable on August 17 to all shareholders as of the record date of August 8. Michael's executor receives the $64,000 dividend on the scheduled payment date. ∙ Note receivable (face amount $600,000) payable on demand. The note was received by Michael two years previously from his daughter Addison. Addison used the loan to start a business which currently is very successful. In his will, Michael forgives the note. How much, as to these transactions, is included in Michael's gross estate?

To make the election to split gifts under § 2513, spouses must file a Form 709 (Federal gift tax return).

Interest on state and local bonds is not subject to the Federal estate tax.

Classify each statement appropriately -Post-death property taxes paid to county on realty included in the gross estate.

A father wants to give a parcel of land to his two children. If he wants the survivor to have sole ownership, he should list ownership of the property as joint tenants.

Match each statement with the correct choice. Some choices may be used more than once or not at all -Election to split gifts (§ 2513)