CPA Reg - Module 10

Federal Estate Tax Valuation of Property—The valuation date is the

date of death, or the executor can elect to have the property valued on an alternative valuation date.

American Opportunity Tax Credit--To be eligible, the student must be enrolled in a

degree program

Specific Inclusions in Gross Estate Retained Interests—A general power of appointment allows the taxpayer to

designate property to herself, her creditors, or to others.

Gift-Splitting--The value of the gift is

divided in two and each spouse is treated as making a gift.

Federal Estate Tax Marital Deduction—Property that passes to the surviving spouse as a result of joint tenancy (does/does not) qualify.

does

The recipient of a gift is called a

donee

Joint Ownership—Transfers of cash to joint bank accounts do not constitute a complete gift until the

donee withdraws the cash

Federal Estate Tax--Other Dedutions Casualty and Theft Losses--The losses must be incurred

during the administration of the estate.

The Gift-Splitting Election is available

each year

Federal Estate Tax Valuation of Property—The election to use the alternate valuation date is only available if

it causes gross estate and tax payable to decline.

Savers Credit--The taxpayer must be

18 or older, not a full-time student, nor claimed as a dependent on another return, and cannot receive a distribution from the account.

Savers Credit--The credit is a maximum of

$1,000 (in addition to any exclusion or deduction that would otherwise apply) and is based upon IRA contributions (Roth or Traditional).

Residential Energy Efficiency Property (REEP)--A credit is provided for manufacturers of energy-efficient residential homes. An eligible contractor may claim a tax credit of

$1,000 or $2,000 for the construction or manufacture of a new energy efficient home that meets certain criteria.

Child Credit--The maximum amount of the credit that is refundable is

$1,400 (2020) per qualifying child.

Federal Estate Tax--Estate Tax Computation Credits against the estate tax--For 2020, the unified credit will eliminate the tax on a net estate of

$11,580,000

Adoption Credit--Reasonable expenses up to

$14,300 (2020) associated with an adoption qualify for the credit.

Gifts--An "annual exclusion" of _________ eliminates modest gifts from the application of the gift tax.

$15,000 (2020)

Dependent Care Credit--The maximum amount of expense eligible for the credit is

$3,000 ($6,000 if more than one individual qualifies for care) or, if lower, earned income (of the lesser-earning spouse if married).

A ________ Child Credit is allowed for each qualifying child (as defined under the dependency rules) younger than age 17.

$2,000

Education Credits--Lifetime Learning Credit—Is allowed up to a maximum of

$2,000 per taxpayer per year.

Education Credits--The American Opportunity Tax Credit (AOTC) is allowed up to a maximum of

$2,500 per year for each eligible student.

Residential Energy Efficiency Property (REEP)--The law provides a credit for purchases of new qualified fuel cell motor vehicles. The credit ranges from

$4,000 and $40,000, depending on the weight of the vehicle. Certain other vehicles, depending on their fuel efficiency, may qualify for an additional $1,000 to $4,000 credit.

Gifts and Inheritances--The income and remainder interests are valued using actuarial tables provided by the IRS. The rate used in the valuation is

120% of the applicable Federal midterm rate (published by the IRS) for the month in which the transfer is made.

Residential Energy Efficiency Property (REEP) Nonbusiness energy property--The credit has a lifetime maximum of

$500

Credit for the Elderly and the Disabled--Credit is

15% of an initial amount reduced by certain amounts excluded from gross income and AGI in excess of certain levels.

American Opportunity Tax Credit--The credit is phased out ratably for single taxpayers with AGI in excess of

$80,000 ($160,000 in the case of a joint return). The credit is phased out over a $10,000 range ($20,000 for joint return) and, thus, is completely gone when AGI reaches $90,000 ($180,000 joint return).

Lifetime Learning Credit--The credit is computed as

20% of $10,000 of qualified educational expenses incurred for the taxpayer, spouse, or dependent.

Under the CARES Act passed in March 2020, eligible individuals receive a credit equal to the sum of:

1. $1,200 ($2,400 if married filing jointly), plus 2. $500 for each qualifying child.

Credit for the Elderly and the Disabled--Initial amount varies with filing status.

1. $5,000 for single or joint return where only one spouse is 65 or older 2. $7,500 for joint return where both spouses are 65 or older 3. $3,750 for married filing a separate return 4. Limited to disability income for taxpayers under age 65

Credit for the Elderly and the Disabled--Also reduced by 50% of the excess of AGI over:

1. $7,500 if single; 2. $10,000 if joint return; 3. $5,000 for married individual filing separate return.

The Residential Energy Efficiency Property (REEP) credit allowed for a tax year equals the sum of:

1. 26% (2020) of the qualified solar electric property expenditures; plus 2. 26% (2020) of the qualified solar water heating property expenditures.

Family Tax Credit--Examples of individuals who may qualify taxpayers for a $500 credit are:

1. A parent who is a qualifying relative 2. Other dependents who are qualifying relatives 3. Children who are 17 years and older since they are not eligible to be claimed for the child tax credit 4. Children less than age 24 who are full-time college students

Gross gifts include the following:

1. Cash and property transfers 2. Debt forgiveness to family members 3. Sales at bargain prices to family members 4. Loans to family members at a bargain (below-market interest rates) 5. Transfers of property into trust for the benefit of others 6. Purchases of jointly owned real estate or securities if one co-owner contributes more than a fair proportionate share

The additional child tax credit is refundable to the extent of

15% of the taxpayer's earned income in excess of $2,500. For a taxpayer with three or more qualifying children, the credit is the greater of this amount or the excess of his Social Security taxes for the tax year over his Earned Income Credit for the year.

The following are not considered to be gifts subject to the federal gift tax:

1. Donations of personal services 2. Transfers that can be revoked, such as placing assets in revocable trusts or placing cash into a joint bank account until the noncontributing owner actually withdraws funds. (When the noncontributing owner actually withdraws funds, a gift is now made.) 3. Payments to minor family members for food, shelter, clothing, and other reasonable support needs 4. Payments to an employee that in substance are compensation for personal services 5. Payments for education expenses or medical expenses paid on behalf of a donee, provided the payments are made directly to the educational institution or the medical provider 6. Payments for political contributions 7. Property settlements incident to divorce

Dependent Care Credit--Other rules include:

1. Expenses for a child below kindergarten qualify; expenses for before or after school care of a child in kindergarten or higher grade may qualify. 2. Full amount paid for day camp or similar programs, even if the program specializes in a particular activity. 3. Summer school and tutoring programs are education and do not qualify. 4. Sick child centers may qualify for either the credit or a medical expense, but not as both. 5. For boarding school, amounts paid for food, lodging, clothing, and education must be separated from amounts paid for other goods or services. 6. Additional cost of providing room and board for a caregiver may qualify if expenses are in addition to normal household expenses. 7. Cost of overnight expense does not qualify. 8. The Expenses incurred during the specific time of day that the taxpayer was looking for a job also qualify.

There are four steps to calculate the gift tax:

1. First, determine current taxable gifts (gifts reduced by exclusions and deductions). 2. Second, add previous taxable gifts and calculate the total gift tax. 3. Third, reduce the total gift tax by the gift tax computed on taxable gifts from previous periods using the current rates for the unified tax. 4. Fourth, reduce any remaining gift tax by the unused portion of the unified credit.

Deductions—Two important deductions are available in calculating the amount of taxable gifts.

1. Marital Deduction 2. Charitable Contribution Deduction

The Residential Energy Efficiency Property (REEP)--New qualified plug-in electric drive motor vehicle credit (NQPEDMV credit) rules

1. Must have battery capacity of at least 4 kilowatt-hours, and the base amount of the NQPEDMV credit is $2,500 per vehicle. 2. Increases to $5,000 per vehicle based on a formula that increases the credit by $417 for every kilowatt-hour of battery capacity in excess of 5. 3. The credit is allowed in the year the vehicle is placed in service. 4. The vehicle must be new.

Exclusions from Gift Tax—Certain transfers are not considered gifts:

1. Payment of another individual's medical or educational expenses (tuition and fees only) is not considered a gift. However, these payments must be made directly to the medical provider or the educational institution. 2. Political contributions are not gifts. 3. The satisfaction of an obligation is not a gift. 4. Transfers to civic leagues and social welfare organizations; labor, agricultural and horticultural organizations; and business leagues are not gifts.

The order of applying credits against tax is determined by the nature of the credit:

1. Personal (i.e., nonrefundable) credits are limited to gross tax, and there is no carryover of any excess. 2. The general business credit is limited to a percentage of gross tax after personal credits, and any excess carries over (back one year and forward 20 years). 3. Refundable credits (see list above) are applied last because these credits have no limit based upon tax (any excess, or a portion of the excess, is refunded to the taxpayer).

Specific Inclusions in Gross Estate Life Insurance—Proceeds are included in the gross estate under either of two conditions.

1. The decedent had incidents of ownership (e.g., the right to designate the beneficiary). 2. The decedent's estate or executor is the beneficiary of the insurance policy.

The Transfer Must be Complete to be Treated as a Gift. How is the transfer completed?

1. The gift must be delivered to the donee. 2. The donor must give up control of the property. 3. The donee must accept the gift; the donee cannot disclaim or refuse the gift or it will be incomplete.

Federal Estate Tax Estate Tax Computation—There are four steps to calculating the estate tax.

1. The taxable estate is increased by adjusted taxable gifts made after 1976. 2. Apply current tax rates to total transfers. The maximum tax rate is 40%. 3. Reduce the tentative transfer tax by gift taxes paid or payable (at current rates) on post-1976 gifts. 4. Subtract the unified credit and other credits.

Integration of Gift and Estate Tax Deductions—For both the estate and gift taxes.

1. There is an unlimited marital deduction for transfers to a spouse. 2. There is an unlimited charitable contribution deduction for transfers to charity.

Earned Income Credit--If the credit is claimed due to fraud the period is ineligible to claim the credit for

10 years

Specific Inclusions in Gross Estate Jointly Owned Property—For jointly owned property with the right of survivorship (unmarried owners), _______ of the property is included in the estate of the first owner to die.

100%

American Opportunity Tax Credit--The credit is computed as

100% of the first $2,000 and 25% of the next $2,000 of qualified educational expenses.

Earned Income Credit--Information on qualifying children for the earned income credit is reported on Form

1040 Schedule EIC

Credit for the Elderly and the Disabled--Credit cannot be claimed if Form _______ or __________ is filed.

1040A or 1040EZ

Dependent Care Credit--The credit percentage begins at

35% if an AGI is less than $15,000, and is reduced by 1% for each $2,000 increment (or part) in an AGI above $15,000. The minimum dependent care credit is 20%.

American Opportunity Tax Credit--The credit can be claimed against the AMT, and ________ of the credit is refundable.

40%

Savers Credit--Qualifying taxpayers multiply IRA contributions by

50%, 20%, or 10% depending on the level of AGI (indexed for inflation).

Earned Income Credit--The credit percentage is

7.65% for no qualifying children, 34% for one qualifying child, 40% for two qualifying children, and 45% for three or more qualifying children.

Earned Income Credit--A paid preparer must also complete Form _____ which provides a checklist to insure that the preparer met all due diligence requirements for taking the EIC on the return. There is a $530 (2020) penalty for each failure to meet these requirements.

8867

Family Tax Credit

A $500 nonrefundable credit is allowed for dependents who are not "qualifying children" for purposes of the $2,000 child tax credit.

Define Generation-Skipping Tax

A supplemental tax, that prevents the avoidance of the transfer taxes by skipping one generation of recipients.

Define Gift

A transfer of property for less than adequate consideration.

Adoption Credit--The credit begins to be phased out for taxpayers with an

AGI (2020) in excess of $214,520, and is completely phased out for taxpayers with modified adjusted gross income of $254,520.

Savers Credit--No credit is allowed for taxpayers with an

AGI (2020) in excess of $65,000 ($48,750 for head of household and $32,500 for single taxpayers)

Define Special Use Valuation

Allows realty to be valued at a current use that does not result in the best or highest fair market value.

Define Life Interest

An interest in property that is retained for the life of the transferor.

Define Terminable Interest

An interest in property that terminates upon the death of the recipient.

Specific Inclusions in Gross Estate Transfers within Three Years of Death—The property is included at the

date of death value.

Gifts--The annual exclusion is applied

per donee per year

Note

Expenses incurred in carrying out a surrogate parenting arrangement or in adopting a spouse's child do not qualify for the adoption credit.

Specific Inclusions in Gross Estate Retained Interests—Is

Property transferred where the decedent retained an interest or a power.

Define Adjusted Taxable Gifts

Taxable gifts other than gifts already included in the gross estate. Adjusted taxable gifts are included at date of gift values.

Dependent Care Credit

The dependent care credit is designed to provide a tax credit for a portion of the expenses incurred for caregiving while the taxpayer is employed.

Define Present Interest

The right to income or to enjoy property currently

Define Fair Market Value

The standard is the amount that a willing buyer and willing seller would agree upon when both are in possession of all relevant information.

Integration of Gift and Estate Tax—The federal gift tax and estate tax are coordinated in order to assure that

all transfers are only subjected to one of the two transfer taxes.

Federal Estate Tax--Marital Deduction Qualified terminable interest property (QTIP) will qualify for the deduction. True or False

True

Dependent Care Credit--Income is imputed to a full-time student (at least five months per year) or

a spouse incapable of self-care ($250 per month for one child; $500 per month for more than one).

Federal Estate Tax Marital Deduction—In order to avoid taxing a married couple's estate twice, a deduction is provided for

a transfer or bequest to a surviving spouse.

Adoption Credit--Qualified adoption expenses are taken into account in the year the

adoption becomes final and include all reasonable and necessary adoption fees, court costs, attorney fees, and other expenses that are directly related to the legal adoption by the taxpayer of an eligible child.

Adoption Credit--The adoption credit is allowed for

adoption expenses

Specific Inclusions in Gross Estate Retained Interests—A retained life estate or the retention of a power to

alter, amend, or revoke a transfer are retained interests that cause the property subject to the power to be included in the gross estate.

Federal Gift Tax Filing requirements—The requirement for filing a return is based upon the

annual exclusion.

Federal Estate Tax The GST is not widely applicable because most transfers qualify for an

annual gift tax exclusion and each donor/decedent is entitled to a large aggregate exemption that is equal to the amount of the unified credit for the estate tax.

Credit for the Elderly and the Disabled--Reduced by

annuities, pensions, Social Security, or disability income that is excluded from gross income.

Federal Estate Tax--Other Dedutions Casualty and Theft Losses—Are deductible without

any floor limitation

Specific Inclusions in Gross Estate Transfers within Three Years of Death—The gift tax paid on the gift is included in the estate for

any gifts made within three years of death (this is the gross up provision).

Federal Estate Tax--Other Dedutions Charitable Contributions—Are deductible without

any limitation

Federal Estate Tax--Other Dedutions Final Expenses (are/are not) deductible

are

Dependent Care Credit--A qualifying child or dependent under the age of 13

automatically qualifies (the child can violate the gross income test and still qualify for care).

Gift Splitting—In community property states, one-half of all property generally belongs to each spouse. Hence, a gift of community property is

automatically split between the spouses.

Adoption Credit--The credit is limited to the regular tax liability, but any excess credit is

carried forward for five years

Adoption Credit--A $14,300 (2020) adoption credit is available for

children with special needs regardless of actual expenses.

Earned Income Credit--Taxpayers between the ages of 25 through 64 without qualifying children are also eligible if they are not

claimed as a dependent on another's return and lived in the United States for more than half the year.

The estate tax is levied on the estate, but installment payments of estate taxes is available for

closely held business interests.

Joint Ownership—A purchase of a savings bond held jointly in the name of the donee and the donor is not a ___________ gift.

complete

Special Use Valuation--This election is available when the business is

conducted by the decedent's family, constitutes a substantial portion of the gross estate, and the property passes to a qualifying heir of the decedent.

Adoption Credit--Qualified adoption expenses incurred or paid during a tax year prior to the year in which the adoption is finalized may be claimed as a

credit in the tax year following the year the expense was incurred.

Gift Tax Formula—The gift tax calculation includes

current gifts and past gifts.

Gross Estate Property Owned by the Decedent—Property owned at the ________ is included in the probate estate.

date of death

Dependent Care Credit--The taxpayer must be employed and

earn at least as much as the amount of the expenses. If married, then the taxpayer must file jointly (unless abandoned) and the spouse must also be employed.

Earned Income Credit--The credit is generated by

earning income

The AOTC credit, the Lifetime Learning Credit, and distributions from educational IRAs are mutually exclusive in that an

educational expenditure can never simultaneously qualify for more than one benefit (i.e., no "double dipping").

Credit for the Elderly and the Disabled--Eligible taxpayers are those who are

either (1) 65 or older or (2) permanently and totally disabled.

Credit for the Elderly and the Disabled--Permanent and total disability is the inability to

engage in substantial gainful activity for a period that is expected to last for a continuous 12-month period.

The Purpose of a Gift-Splitting Election—Is to

equalize treatment of gifts by spouses with the treatment of gifts in a community property state.

Gifts and Inheritances--A transfer at death (a testamentary transfer) triggers the ________ tax.

estate

Federal Estate Tax--Other Dedutions Casualty and Theft Losses—The executor has option of deducting casualty and theft losses on the

estate tax return or the estate's income tax return.

Federal Gift Tax Filing requirements--The gift tax return (Form 709) is due if gifts

exceed the annual exclusion or if a gift is made of a future interest.

Energy Tax Credits Residential Energy Efficiency Property (REEP)— Individual taxpayers are allowed a credit for

expenditures for installing certain energy-efficient property in the taxpayer's residence.

Federal Estate Tax Valuation of Property—Property is included in the gross estate at the

fair market value

Federal Estate Tax--Other Dedutions Casualty and Theft Losses—The casualty must be attributable to a

federally declared disaster area.

Federal Gift Tax Charitable Contribution Deduction—A charity is defined similarly to income tax (educational, scientific, religious organizations), but includes

foreign charities and excludes cemeteries.

Federal Estate Tax--Estate Tax Computation A credit is allowed for all or part of the death taxes paid to a

foreign country

Residential Energy Efficiency Property (REEP) Nonbusiness energy property--The credit is a fixed dollar amount ranging from $50 to $300 for energy-efficient property including

furnaces, boilers, biomass stoves, heat pumps, water heaters, central air conditioners, and circulating fans.

Gifts and Inheritances--A transfer during the life of the donor (an inter vivos transfer) triggers a _______ tax.

gift

Joint Ownership—The creation of a joint ownership interest without equal consideration from each co-owner is considered a

gift of the excess contribution to the owner making a smaller contribution.

Integration of Gift and Estate Tax--The unified credit applies to taxable transfers by

gift or bequest to allow a minimum cumulative amount of tax-free transfers.

Joint Ownership—The creation of a joint interest without adequate consideration creates a

gift regardless of the form of ownership (tenancy in common or joint tenancy).

Federal Estate Tax--Estate Tax Computation If property gifted before 1977 is included in the transferor's gross estate, a credit is allowed for any gift taxes paid on these gifts equal to the lesser of the

gift tax paid or the estate tax attributable to this property.

Gift-Splitting--Both spouses can use an annual exclusion for gifts of present interests. Note, that both spouses will need to file a

gift tax return so that each can elect gift-splitting.

Federal Gift Tax Charitable Contribution Deduction—Is allowed for

gifts to charitable organizations.

Gross Estate Property Transferred by the Decedent at Death—Is also included in the

gross estate

Specific Inclusions in Gross Estate Jointly Owned Property—The value of the decedent's interest as a tenant in common is included in the

gross estate

Federal Estate Tax--Estate Tax Computation Filing Requirement—The requirement for filing a return is based upon whether the

gross estate exceeds the exemption equivalent.

Specific Inclusions in Gross Estate Transfers within Three Years of Death—Certain gifts within three years of death are included in the

gross estate of the decedent.

An estate tax return must be filed if the

gross estate plus adjusted taxable gifts equal or exceed the exemption equivalent.

Credit for the Elderly and the Disabled--Married individuals must file a joint return to claim the credit unless they

have not lived together at all during the year

The recipient of an inheritance is called an

heir

Federal Estate Tax Estate Tax Computation—Including gifts results in a

higher tax rate applied to the estate property

Federal Gift Tax Filing requirements--April 15 is the due date for gifts made

in the prior year; no fiscal years are allowed.

Adoption Credit--Adoption expenses incurred during the year the adoption becomes final or in the year following the finalization of the adoption are claimed

in the year they were incurred.

Specific Inclusions in Gross Estate Jointly Owned Property—For jointly owned property by a husband and wife (right of survivorship or tenancy in the entirety), 50% of the value of the property will be

included in the estate of the first spouse to die.

Gifts and Inheritances--The beneficiary of the income interest receives the _________ from the trust each year.

income

Earned Income Credit--The credit is disallowed if disqualified income, such as

interest, dividends, tax exempt interest, and other investment income exceeds $3,650 (2020).

Specific Inclusions in Gross Estate Jointly Owned Property—(is/is not) included in the gross estate.

is

Child Credit--A taxpayer who erroneously claims the child credit due to intentional disregard of the rules is

is ineligible to claim the credit for a period of two tax years. If the credit is claimed due to fraud the period is extended to 10 years.

Federal Gift Tax Marital Deduction--The marital deduction does not apply for gifts to a spouse who

is not a U.S. citizen, but an annual exclusion of $157,000 (2020) is permitted.

Specific Inclusions in Gross Estate Retained Interests—A special power or appointment does not allow a taxpayer to designate property to him. Therefore, if the taxpayer dies while retaining the special power, the property subject to the appointment

is not included in his gross.

Federal Gift Tax Charitable Contribution Deduction—There is no ___________ on the amount of the deduction.

limitation

Dependent Care Credit--To be eligible for the credit, a person needing care must

live with the taxpayer for more than half the year.

Joint Ownership—The creation of a joint interest with a spouse (with the right of survivorship) is not taxed because of the

marital deduction

Earned Income Credit--A taxpayer cannot claim the credit if she files as

married filing separately

Child Credit-The credit is phased out for

married taxpayers with AGI in excess of $400,000 ($200,000 for unmarried). The credit is reduced $50 for each $1,000 (or portion) over the trigger AGI amount. These amounts are not indexed for inflation.

Right of survivorship means

means that when one co-owner dies, the property immediately passes to the other co-owners.

Earned Income Credit--The earned income credit is a complex method of

mitigating employment taxes for low income taxpayers.

Federal Estate Tax The GST is not applicable to a transfer of property to someone who is

more than one generation younger than donor or decedent, if the persons in the intervening generation are deceased (e.g., a transfer to a grandchild is not subject to the tax if the grandchild's parents are dead).

Federal Estate Tax Marital Deduction—Only the net value of property subject to __________ qualifies.

mortgage

Federal Estate Tax--Other Dedutions Debts of the Estate—These debts, for example _______ and ________ are deductible

mortgages and accrued taxes

Federal Gift Tax A Marital Deduction—Is allowed for

most gifts to a spouse

Dependent Care Credit--The credit is calculated by

multiplying the qualifying expenditures by the appropriate credit percentage.

The estate tax return (form 706) is due

nine months after date of death.

Lifetime Learning Credit--Qualified educational expenses are

nondeductible tuition and academic fees (reduced by tax-free benefits, such as scholarships) incurred by a taxpayer.

American Opportunity Tax Credit--Qualified educational expenses are

nondeductible tuition and academic fees (reduced by tax-free benefits, such as scholarships) incurred during a student's first four years of postsecondary education. The expenses must relate to an academic period beginning in the current tax year, or the first three months of the next tax year. Course materials are also included.

Child Credit--Taxpayers electing to exclude foreign income or housing benefits are

not eligible for the refundable portion of the credit.

Federal Gift Tax Filing requirements--If the donor dies, the gift tax return for the year of death is due

not later than the due date for filing the decedent's federal estate tax return (generally nine months after date of death).

Integration of Gift and Estate Tax--Because the unified credit applies to taxable transfers, it is not used to

offset transfers eligible for a marital deduction (transfers to a spouse) or charitable deduction (transfers to a charity).

Gifts and Inheritances--The donor or decedent can only transfer their ownership interests and not the interests owned by others. In community property states (Texas and California, among others), property acquired during a marriage is owned

one-half by each spouse

Gross Estate Transfer of property occurs without probate through

operation of law

Earned Income Credit--A taxpayer who erroneously claims the earned income credit due to intentional disregard of the rules is ineligible to claim the credit for a

period of two tax years

Lifetime Learning Credit--The expenses must be for

post-secondary education, but need not relate to a degree program. Student does not need to be at least half-time for expenses to qualify.

Gifts--The annual exclusion only applies to a gift of a

present interest

Gifts and Inheritances--The beneficiary of the remainder interest receives the ______________ of the trust when the trust terminates.

property (corpus)

Gross Estate—The gross estate includes

property owned by the decedent at death and certain property transfers.

Specific Inclusions in Gross Estate Retained Interests—The power to designate possession or enjoyment of property or income (including power created by another that can be exercised in the decedent's favor) will also cause the

property to be included in the gross estate.

Federal Estate Tax--Marital Deduction No marital deduction is allowed for non-citizen spouses. An exception to this rule is a transfer to a

qualified domestic trust, which assures estate tax imposition upon a non-citizen spouse's death.

Earned Income Credit--The credit percentage increases if the taxpayer maintains a home with

qualifying children

Federal Estate Tax Marital Deduction—To qualify for the marital deduction, the spouse must

receive property outright and be able to control its ultimate destination.

Lifetime Learning Credit--.Materials and textbooks are qualified expenses only if

required to be purchased from the university (this differs from the AOTC)

Gross Estate Property Transferred by the Decedent at Death—Other forms of property that pass by operation of law include

retained life estates, revocable gifts, transfers triggered by death (retirement benefits), and life insurance.

The Lifetime Learning Credit is phased out ratably for

single taxpayers with an AGI for 2020 in excess of $59,000 ($118,000 in the case of a joint return) and is phased out over a $10,000 range ($20,000 for married-jointly).

Federal Estate Tax Valuation of Property—The alternate valuation date is

six months after the date of death or on the date the property is disposed of (if earlier than six months after the date of death).

Federal Estate Tax Valuation of Property—An executor can elect to value certain realty used in farming or in connection with a closely held business at a

special use valuation The farm or business must continue to be used in that capacity for at least five years during the eight-year period after the date of death.

Under the Gift-Splitting Election—A gift is

split and treated as being given equally by both spouses.

Gifts and Inheritances--Transfers, in a business context, are typically for consideration, meaning that they are _________ to the recipient/employee.

taxable

Federal Estate Tax Estate Tax Computation—The estate tax calculation uses the

taxable estate increased by adjusted taxable gifts

Federal Estate Tax--Estate Tax Computation There is a credit for tax on "prior transfers" to adjust for

taxes on proximate deaths (deaths within 10 years).

American Opportunity Tax Credit--A qualifying student includes the

taxpayer, spouse, or any dependent of the taxpayer enrolled at least half time in an institution of higher education.

Federal Estate Tax Marital Deduction—Property rights that are __________ do not qualify.

terminable

Federal Gift Tax Marital Deduction--Gifts of _________ generally do not qualify for the deduction.

terminable interests

Federal Estate Tax--Other Dedutions The executor has the option of deducting administration expenses on the estate tax return or the estate's income tax return (Form 1041). If deducting on the income tax return the executor must indicate

that the deduction will not also be taken on the estate tax return.

Credit for the Elderly and the Disabled--The amount of credit is limited to

the amount of tax liability.

Federal Gift Tax Filing requirements--No gift tax return is required if a gift to charity exceeds

the annual exclusion, as long as the entire value of the transfer qualifies for a charitable contribution.

Dependent Care Credit--Expenditures for household services and care are required for the credit. Care can be given within the home, but

the care giver cannot be a dependent relative or child of the taxpayer.

The decedent's will directs transfers after

the death of the decedent

Federal Estate Tax--Marital Deduction The surviving spouse must receive all of the trust income annually (or more often) for life, but

the decedent determines where the property goes at the surviving spouse's death.

Federal Estate Tax--Other Dedutions The executor has a similar option for medical expenses that were incurred before the date of death, and paid after the date of death. The executor can elect to deduct these on

the estate tax return or the decedent's final income tax return (Form 1040), but not on both.

Integration of Gift and Estate Tax Unified credit—A unified credit provides that

the first $11,580,000 (2020) of transfers from an estate and/or gifts will not trigger a tax liability

Gifts and Inheritances--When a taxpayer transfers property to a trust, the taxpayer has made two gifts,

the income interest and the remainder interest (unless the donor retains one of these interests).

Joint Ownership—The termination of joint ownership may also trigger a tax, if

the proceeds are not divided according to each owner's interest.

Federal Estate Tax--Marital Deduction The property must be included in the surviving spouse's estate at its value when

the survivor dies.

Earned Income Credit--Taxable disability payments from an employer plan qualify as earned income until

the taxpayer reaches normal retirement age.

Specific Inclusions in Gross Estate—Certain property transfers are included in the gross estate because

the transfer could be used to avoid the estate tax.

Dependent Care Credit--Other dependents or a spouse will also qualify if

they are incapable of self-care (physical or mental disability). This individual must live in the same household as the taxpayer for more than half of the tax year.

For the Gift-Splitting Election the donor must be married at the

time of the transfer

Federal Gift Tax Marital Deduction--The amount of the deduction is the

total gift less any excluded portion (if the annual exclusion applies).

The donee or heir is secondarily liable for the ________ tax

transfer

Federal Estate Tax Generation-skipping tax (GST) is triggered by the

transfer of property to someone who is more than one generation younger than the donor or decedent (e.g., a grandparent transfers property to a grandchild, rather than a child).

Federal Estate Tax--Marital Deduction An election is made to use the marital deduction for a

transfer to a spouse of less than a complete interest in trust.

Federal Estate Tax Marital Deduction—The deduction is (limited/unlimited) in amount.

unlimited

Federal Gift Tax Marital Deduction--The deduction is _________ in amount

unlimited

Federal Estate Tax--Estate Tax Computation Credits against the estate tax--Any unused credit from a spouse dying after 2010 may be

used in the future by the surviving spouse

Earned Income Credit--The taxpayer must have been a U.S. citizen or resident alien for the entire tax year and must have a

valid Social Security number to claim the credit.

Savers Credit--is allowed for

voluntary contributions to IRA and qualified retirement accounts.

Earned Income Credit--The most common sources of earned income that qualify for the credit are

wages, salaries, tips, and earnings from self-employment. Combat pay can also be included as earned income.

The Residential Energy Efficiency Property (REEP)--Nonbusiness energy property. A credit of 10% of the amounts paid or incurred by the taxpayer is allowed for qualified energy improvements to the main structure of principal residences such as

windows, doors, skylights, and roofs.