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Exam 27: The Federal Gift and Estate Taxes

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Question 61

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At the time of her death, Amber owns property worth $5,000,000. Other information regarding her affairs is as follows. All of these items (except the casualty loss) were paid by her estate, and none were deducted on Form 1041 (income tax return of the estate). What is Amber's taxable estate?

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$4,050,000. $5,000,000 (gross estate) - ...

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Question 62

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Homer and Laura are 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 owns 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?

A) $2,000,000
B) $2,500,000
C) $3,500,000
D) $4,500,000

E) B) and C)
F) A) and C)

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Question 63

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

To avoid the terminable interest limitation on the marital deduction, a QTIP election must be made.

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. -Casualty loss to property after the death of the owner.

At the time of her death on June 6, Mary owned the following assets. ? Taupe Corporation stock (cost $400,000, FMV $800,000). On May 4, Taupe declared a cash dividend, payable on June 15, to shareholders as of the record date of June 4. Mary's executor received the $40,000 dividend on the scheduled payment date. ? City of Boise bonds (cost $800,000, FMV $780,000). Interest accrued to June 6 was $42,000. The executor eventually collected $50,000 (included post-death accrual of $8,000) on July 20. As to these transactions, how much is included in Mary's gross estate?

Transfers to political organizations are exempt from the application of the Federal gift tax.

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?

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

Sidney dies and leaves property to his sister Giselle. Thirteen months later, Giselle dies. Giselle's estate can claim a full credit for any Federal estate taxes paid by Sidney's estate as to amounts passing to Giselle.

Harry and Brenda are husband and wife. Using her funds, Brenda purchases real estate which she lists as: "Harry and Brenda, joint tenants with right of survivorship." If Brenda dies first, all of the value of the real estate will be included in her gross estate.

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." Nadine predeceases Horace.

Sally's will passes real estate to Otto (her surviving husband). The real estate is worth $800,000 but is subject to a mortgage of $200,000. The transfer provides Sally's estate with a marital deduction of $600,000.

Classify each statement appearing below. a. No taxable transfer occurs b. Gift tax applies c. Estate tax applies -Maggie purchased an insurance policy on Jim's life and designated Susan as the beneficiary. Four years later Jim dies, and Susan collects the insurance proceeds.

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. -Proceeds of an insurance policy on decedent's life. Decedent's son purchased the policy and is its owner and beneficiary.

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. -Payment of unpaid gift taxes.

For Federal estate tax purposes, the gross estate does not include property that will pass to a surviving spouse.

Manfredo makes a donation of $50,000 to the church where he was baptized in Mexico City. The gift does not qualify as a charitable contribution for Federal income tax purposes.

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

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