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Exam 27: The Federal Gift and Estate Taxes

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Question 1

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Classify each statement appearing below. a. No taxable transfer occurs b. Gift tax applies c. Estate tax applies -Under her father's will, Faith is to receive 10,000 shares of GE common stock. Ten months after her father's death, Faith disclaims 10,000 shares.

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Question 2

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Andrea dies on April 30. Which, if any, of the following items is included in her gross estate?

A) Rents for the month of May (received on May 2) on an apartment building she owned.
B) Rents for the month of March (received on May 2) on an apartment building she owned.
C) Insurance recovery from a fire which occurred on November 1, and destroyed Andrea's residence.
D) A loan made by Andrea to her daughter and forgiven by Andrea in a prior tax year.

E) A) and C)
F) All of the above

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Question 3

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The Federal unified transfer tax exclusion amount:

Lyle and Kelly are brother and sister. Using his funds, Lyle purchases land, listing title as: "Lyle and Kelly, joint tenants with right of survivorship." If Kelly dies first, none of the land is included in her gross estate.

Murray owns an insurance policy on the life of his father, Logan. Upon Logan's death, the policy proceeds of $2,000,000 are paid to the designated beneficiary, Grace. What are the transfer tax consequences resulting from Logan's death, based on the following independent assumptions? a. Grace is Murray's daughter. b. Grace is Murray's wife. c. What are the tax consequences if Murray dies first (i.e., predeceases both Grace and Logan)?

Ben and Lynn are married and have four pre-teen grandchildren. They want to contribute to a § 529 plan on behalf of their education. For 2018, what is the maximum amount they can transfer to the plan without making a taxable gift?

A surviving spouse's share of the community property is not included in the deceased spouse's gross estate.

Walt dies intestate (i.e., without a will) in the current year with a gross estate valued at $4,000,000. Under applicable state law, Walt's property passes to Kelly or to Belle, in that order. Kelly has an estimated net worth of $3,000,000 while Belle's is zero. From a tax planning standpoint, what course of action might be advisable?

Ray purchases U.S. savings bonds which he lists as "Ray and Donna" as co-owners. Donna is Ray's daughter. Donna predeceases Ray. No gift or estate tax consequences result from this situation.

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

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 of the independent statements appearing below. a. Some or all of the asset is included in the decedent's gross estate. b. None of the asset is included in the decedent's gross estate. -Decedent owned a policy on the life of his spouse with himself as the designated beneficiary. The spouse survives.

Which, if any, of the following is a characteristic of the Federal gift tax?

Concerning the Federal estate tax deduction for asset transfers to charity:

Classify each of the independent statements appearing below. a. Some or all of the asset is included in the decedent's gross estate. b. None of the asset is included in the decedent's gross estate. -State income tax refund received after death on a tax return filed before death.

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

In most cases, the gross estate of a decedent is larger than the probate estate.

If the value of the gross estate is lower on the alternate valuation date than on the date of death, the date of death valuation cannot be used.

The Federal gift-splitting election:

Classify each of the independent statements appearing below. a. Some or all of the asset is included in the decedent's gross estate. b. None of the asset is included in the decedent's gross estate. -Note receivable issued by a grandson and forgiven by the decedent in her will.