TAX 497 - Chapter 18
At the time of her death on October 4, Kaitlyln was involved in the following transactions: Was the sole life beneficiary of a trust (assets worth $2 mil) created 10 years ago by Paul (Kaitlyn's husband). The transfer was by gift of securities when worth $500,000. Paul and Kaitlyn's children are the remainder persons. Owned stock in Mauve Corporation (basis of $800,000 and FMV of $1 mil). On September 7, a dividend of $48,000 was declared on the stock payable to all shareholders of record on October 3. The $48,000 was received by Kaitlyn's executor on October 19. Kaitlyn made a taxable gift of $400,000 in a prior year tax. As to these transactions, Kaitlyn's gross estate includes:
$1,048,000 Mauve stock (FMV) and dividend are included (record date of dividend is before death). Because there is no QTIP election, the trust is not included in a donee spouse's estate.
At the time of her death, Megan was involved in the following: Owned an insurance policy on the life of her father with a replacement cost of $250,000 and maturity value of $800,000. The designated beneficiary of the policy is Megan's estate Was an equal tenant in common with her brother in a tract of land worth $800,000. The land was inherited from their grandmother 10 years ago when it had a value of $200,000 Was a joint tenant with her two sisters in stock worth $1,500,000. The stock was inherited from their grandmother 10 years ago when it had a value of $500,000 As to these transaction, Megan's gross estate must include:
$1,150,000 250,000 (insurance policy replacement cost) + 400,000 (equal tenant in common w/ brother) + 500,000 (1,500,000 * 1/3)
At the time of his death, Norton was involved in the following transactions: Owned land in joint tenancy with Emily. The land is worth $600,000 and was purchased by Norton 15 years ago for $150,000 Owned Land in a tenancy by the entirety with his wife Amy. The land is worth $800,000 and was purchased by Norton 5 years ago for $300,000 Owned land in an equal tenancy in common with Noah. The land is worth $400,000 and was purchased by Norton 4 years ago for $300,000 Owned City of Dayton bonds worth $500,000 What amount is included in Norton's gross estate?
$1,700,000 600,000 joint tenancy with Emily (contributed by Noah) + $400,000 tenant in entirety with wife (800,000/2) + 200,000 equal tenancy with Noah (400,000/2) + 500,000 bonds)
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 martial deduction is allowed Homer's estate?
$3,500,000 (2,000,000 x 50%) + (3,000,000 x 50%) + 1,000,000
In 2005, Mandy and Hal (mother and son) purchased land for $600,000 as joint tenants with right of survivorship. Of the $600,000 purchase price, Mandy provided $300,000 and Hal $300,000 (of which $200,000 had been received as a gift from Mandy). Hal dies first when the land is worth $3,000,000. As to the land, Hal's gross estate must include:
$500,000 $300,000 contribution - $200,000 gift = 100,000 100,000 / 600,000 (total purchase price) x 3,000,000
Robert's gross estate consists of: Land - Value at time of Death: 4.8 mil, Value 6 months later: 4.84 mil Stock in Brown: Value at time of Death: 900,000, Value 6 months later: 700,000 Stock in Green: Value at time of death: 500,000, Value 6 months later: 460,000 Totals: 6.2 mil and 6 mil. What is the estate's value if the executor elects the alternate valuation date?
$6 million It is not permissible to value the land at its date of death value
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?
$60,000 100,000 x 60%
During 2017, Laura makes the following cash gifts: $8,000 to Rita and $15,000 to Maureen. How can Laura claim the annual exclusion?
$8,000 with respect to Rita and $14,000 with respect to Maureen.
At the time of his death, Tom owned some common stock. Citron Corporation - Date of Death: 1,500,000, Value 6 mths later: 1,100,000 Grey Corporation - Date of Death: 1,300,000, Value 6 mths later: 1,400,000 If the alternate valuation date is properly elected, the value of Tom's estate as to these stocks is:
1,400,000 (Grey) + 1,100,000 (Citron) = 2,500,000
The Federal transfer taxes generally apply a flat rate of:
40%
Which of the following is not a characteristic of both the Federal gift tax and the Federal estate tax? a. A deduction for state death taxes may be available b. A charitable deduction is available c. A martial deduction is available d. An exclusion amount is available in computing the tax
A deduction for state death taxes may be available The deduction for state death taxes (§ 2058), formerly a credit, in only available for estate tax purposes.
Concerning the Federal estate tax deduction for asset transfers to a surviving spouse: a. The deduction is disallowed for transfers between same-sex spouse b. A deduction is allowed for a transfer to a member of a same-sex civil union c. A deduction is allowed for life insurance proceeds paid to a surviving spouse d. All of the above statements are true
A deduction is allowed for life insurance proceeds paid to a surviving spouse
Which of the following is a correct statement regarding filing of a gift tax return (Form 709)? a. A donor must file a Form 709 in the same year in which the gift was made b. The due gate of a Form 709 is the same as the due date of the donor's Form 1040. c. A form 709 may have to be filed even though the value of the gift was less than the amount of the annual exclusion. d. Melody gives her husband a new Mercedes convertible for his birthday. Melody must file a Form 709 to report the gift even though no gift tax results
A form 709 may have to be filed even though the value of the gift was less than the amount of the annual exclusion.
Which, if any, of the following is not a characteristic of the Federal estate tax? a. A foreign tax credit is available b. A credit for tax on prior transfers may be available c. A charitable deduction is available d. All of the above
All of the above Other deductions also are allowed.
Concerning the Federal tax on generation-skipping transfers a. The charitable dediction is allowed to reduce the tax b. The marital deduction is allowed to reduce the tax c. A credit is allowed for any state-level GST tax paid d. All of the above statements are true
All of the above statements are true
The Federal gift-splitting election: a. Allows the annual exclusion of both spouses to reduce the gift tax due b. Allows the exemption equivalent of both spouses to reduce the gift tax due c. Is made on both spouses Forms 709 d. All of the above
All of the above.
In 2005, Drew creates a trust with $1,00,000 of securities. Under the terms of the trust, Paula (Drew's wife) is granted a life estate with remainder of their children. Drew makes a QTIP election as to the trust. Drew dies in 2012 when the trust is worth $1,500,000, and Paula dies in 2018 when the trust is worth $2,000,000. Which, if any, of the following is a correct statement? a. The trust is included in Drew's gross estate when he dies in 2012 b. None of the trust is included in Paula's gross estate when she dies in 2018 c. Drew does not get a marital deduction in 2005 d. All of the value of the trust (2,000,000) is included in Paula's gross estate when she dies in 2018.
All of the value of the trust (2,000,000) is included in Paula's gross estate when she dies in 2018. Due to the QTIP election
Which, if any, of the following items is subject to indexation (adjusted to reflect inflation)? a. The election to split gifts under § 2513 b. The limitation placed on the amount allowed as a charitable deduction contribution for estate tax purposes (§ 2055). c. Annual first tax exclusion d. Unified transfer tax rates
Annual gift tax exclusion
The alternate valuation date: a. Applies for Federal estate tax purposes b. Applies for Federal gift tax purposes c. Both estate and gift tax d. Neither estate not gift tax
Applies for Federal estate tax purposes The election can also be used in computing the GST tax.
In 2015, 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 2017, April and Theresa purchase an apartment building for $1 mil as equal tenants in common. April furnished $400,000 and Theresa furnished $600,000 of the cost. April dies first in 2018 when the land is worth 1.5 mil and the apartment building is worth $2 mil. One of the results of these transactions is: a. April made a gif to Theresa of $100,000 in 2017 b. None of the land is included in April's gross estate c. April's gross estate includes $800,000 ($2 mil x 40%) as to the apartment building d. April's gross estate includes $1,750,000 as to these properties
April's gross estate includes $1,750,000 as to these properties 3,500,000 x .5 = $1,750,000 (equal tenant in common)
Al's gross estate consists of assets with a date of death value of $6 million and an alternate valuation date value of $6.1 mil. Under Al's will, all of his property passes outright to Jean (Al's wife). Which valuation should they use and what estate tax will result?
Because of the marital deduction, no estate tax results regardless of which calule is used. The alternate valuation cannot be used as the tax liability as with or without the election would be zero but Jean's basis would be $6.1 mil on the property acquired.
In which of the following independent situations has Trent made a gift? a. Trent established an irrevocable trust, income payable to himself for life and, upon his death, remainder to his children. b. Trent dies owning a US savings bond with ownership listed as "Trent, payable to Sue on Trent's death." Sue redeems the bond c. Trent sends $25,000 to Alice's oral surgeon in payment of her dental implants. Alice is Trent's sister and does not qualify as his dependent. d. Trent pays Eva $80,000 in a property settlement of her marital rights. One month later, Trent and Eva are divorced.
Trent established an irrevocable trust, income payable to himself for life and, upon his death, remainder to his children. This choice is a complete transfer, there is no retention of a right to revoke the trust and he has made a gift of the remainder interest.
A surviving spouse's share of the community property is not included in the deceased spouse's gross estate.
True
A timely issues disclaimer by an heir transfers the property to someone else without a federal gift tax result.
True
For both the Federal gift and estate tax, a deduction is allowed for certain transfers to a spouse.
True
In 2015, and with $100,000, Ronald establishes a joint savings account with his cousin, Allison. In 2017, Allison withdraws the $100,000 and disappears. Ronald made a gift to Allison in 2017.
True
In most cases, the gross estate of a decedent is larger than the probate estate
True
In the case of a transfer by gift, a QTIP election causes the property to be subject to the estate tax upon death of the donee spouse.
True
Peggy gives $200,000 to her grandson. This is an example of a direct skip for purposes of the GSTT (generation-skipping transfer tax).
True
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 martial deduction of $600,000.
True
The purpose of the martial deduction is to defer any estate tax liability until the second spouse dies.
True
To make the election to split gifts, spouses must file a Form 709
True
Transfers to political organization are exempt from the application of the Federal gift tax.
True
The Federal gift tax does not include a: a. Deduction for state gift taxes b. Charitable deduction c. Gift-splitting election d. Marital deduction
Deduction for state gift taxes
Using his separate funds, Wilbur purchases an annuity which pays him a specified amount until death. Upon Wilbur's death, a reduced amount is to be paid to Marcia for her life. Marcia predeceases Wilbut. Nothing oncerning the annuity contract is included in Marcia's gross estate.
True
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.
True A foreign charity is not a qualified organization for Federal income tax purposes.
A lifetime transfer that is supported by full and adequate consideration is not a gift.
True A gift is a gratuitous transfer
The amount of the unified tax credit is the same for both transfers by gift and transfers by death.
True Although not always true, for the past few years, the unified credit has been the same.
Under certain circumstances, the gift-splitting election can be made even though the electing spouses are not longer married to each other.
True As long as the spouses were legally married to each other at the time of the gift and neither has married anyone else during the year.
Mitch pays the surgeon and the hospital for his nondepenent aunt's heart bypass operation. The transfer is not subject to gift tax.
True Because Mitch paid the providers directly, no gift has taken place.
For Federal estate, gift, and generation-skipping tax purposes, the exemption equivalent is the same thing as the exclusion amount.
True Both represent the amount that can pass free of tax under the applicable unified tax credit.
To avoid the terminable interest limitation on the martial deduction, a QTIP election must be made.
True By default, no martial deduction is allowed.
An individual generally tries to reduce the present value of any Federal transfer tax liability.
True Consistent and maximizing after-tax value, estate and gift taxes are typically managed to decrease the present value of the tax
At the time of Dylan's death, her was a resident of the US. He owns land located in a foreign country, which is subject to that country's estate tax. This same land also can be subject to Federal estate tax.
True Dylan may, however, be able to claim a credit against the Federal estate tax for foreign death taxes paid.
In community property states, not all property acquired after marriage by either spouse is community property.
True Generally, property inherited or acquired by gift is separate property.
The Federal transfer tax system includes three separate taxes.
True Gift, estate, and generation-skipping
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.
False All assets are valued on the alternate valuation date if 2032 is elected. In such cases data of death valuation is not utilized.
Although qualified tuition plans under 529 are treated favorably for gift tax purposes, such plans are included in the gross estate upon the grantor's death
False Although the contribution to a 529 plan is not cocmplete, nothing is included in the gross estate upon his or her death during the plan's existence.
For Federal estate tax purposes, the gross estate cannot include property the decedent does not own.
False An example of an inclusion could be a life insurance policy on the decedent's life, when the decedent holds incidents of ownership in the policy.
Pauline sells antique furniture to her dauughter, Nicole, for $10,000 If the furniture is really worth $100,000, Pauline has made a gift to Nicole of $100,000.
False As Nicole paid Pauline $10,000, the gift is only $90,000 ($100,000 FMV - $10,000 consideration received)
Paul, a US citizen, will avoid the Federal estate tax if he becomes a Canadian resident and owns no property located in the US at the time of his death.
False As long as Paul is a US citizen, his residence and the situs of this property makes no difference for estate tax purposes.
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.
False Both spouses are treated as contributing one-half of the purchase price of the property.
In his will, Hernando provides for $50,000 to go to the Madrid, Spain, school system. Because it is a foreign charity, the bequest will not qualify as a charitable deduction for estate tax purposes.
False Foreign charities qualify for the estate tax charitable deduction.
The death of a tenant in common will cancel his or her interest in the property.
False In a tenancy in common, the death of a tenant does not defear (cancel) the ownership interest
Harry and Brenda are husband and wife. Using his funds, Harry purchases real estate which he lists as "Harry and Brenda, tenants by the entirety with right of surviorship" If Brenda dies first, none of the real estate will be included in her gross estate.
False In the case of joint ownership between married persons, a spouse's contribution does not matter. One-half of the value of the property is included in the gross estate of the first spouse to die.
Under his grandfather's will, Thad is entitles to receive shares of Kroger Corporation. For Federal tax purposes, Thad is allowed to disclaim some of these shares and accept the others.
True If timely made, a partial disclaimer is allowed.
A tenancy by the entirety is restricted in most states to having more than 2 joint owners.
False In this regard, a tenancy by the entirety can be likened to a joint tenancy between spouses.
A husband and wife make a gift of their jointly owned vacation home to their adult children. The gift-splitting election must be made.
False No election to split the gift is necessary if the property is jointly owned.
Sam purchases a US Savings bond which he registers as follows: "Sam, payable to Don upon Sam's death." A gift occurs when Sam purchases the bond
False No gift takes place when the bond is purchased. Should Don receive the bond when Sam dies, it is not a gift by a testamentary transfer.
For gift tax purposes, a property settlement is consideration of marriage (ie prenuptial agreement) is treated the same as a property settlement incident to a divorce.
False Prenuptial agreements are subject to gift tax, while divorce settlements are not. Section 2516 treats the latter as being for adequate consideration and, therefore, no gift occurs.
Barry pays State University for his dependent daughter's room and board. Barry has made a trandfer that is subject to the Federal gift tax
False Presuming the daughter is a student at State University, no gift has occured. Barry is satisfying his obligation to support his children.
Two brothers, Sam and Bob, axquire real estate as equal tenants in common. Of the purchase price of $200,000, Sam furnished $80,000 while Bob provided the balance. If Same dies first ten years later when the real estate is worth $600,000, his state includes $240,000 as to the property.
False Sam's estate includes $300,000, as the owners are equal tenants in common
If the value of the gross estate is lower on the alternate valuation date than on eht date of death, the date of death valuation cannot be used.
False Sec. 2032 is elective and the date of death value still can be used.
In 2004, Katelyn inherited considerable property when her father died. When Katelyn dies in 2018, her estate may be able to claim a credit as to some of the estate taxes paid by her father's estate.
False Section 2013 is not available if more than 10 years has elapsed.
Sandy pays a local college for her non-dependent boyfriend's tuition. The payment is subject to the Federal gift tax.
False Section 2503(e) excepts such situations from the Federal gift tax
All of the charitable organizations that qualify for estate tax purposes also qualify for income tax purposes.
False Some difference exist
Interest earned on state and local bonds is not subject to the Federal estate tax.
False Such interest is includible in the gross estate and is subject to the estate tax.
As a result of an auto accident from which she later died, Irene totaled a Bentley worth $195,000. If the insurance company covers $60,000 of the loss, Irene's estate can claim a casualty loss of $135,000 in arriving at the taxable estate.
False The casualty loss should be claimed on Irene's final income tax return. The insurance recovery should be included in the gross estate under 2033.
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.
False The deduction is allowed under 2053(c)(1)(A)
Foe Federal estate tax purposes, the gross estate does not include property that will pass to a surviving spouse.
False The gross estate does include such property, but the marital deduction offsets its inclusion.
At the time of his death, Raul owned a residence with his wife, Manuela, as joint tenants. The residence was purchased by Manuela ten years ago at a cost of $300,000 and has a FMV of $1.4 million. Raul's estate will be allowed no martial deduction as to the property.
False The martial deduction is $700,000 (50% Raul's share in the gross estate x 1.4 Million)
Kim, a resident and citizen of Korea, dies during an operations at the Mayo Clinic in Rochester. Because Kim died in the US, she will be subject to the Federal estate tax.
False The place of death is not the determinant for the application of the Federal estate tax. Unless she owns property located in the US, Kim is not subject to the Federal estate tax.
Reba purchases US savings bonds which she lists in the name of Rod, Reba's son. The purchase of the bonds does not constitute a gift.
False The purchase is a gift. Reba retains no interest in the bonds. Rod does not have to survive Reba to gain ownership of the bonds.
Rachel owns an insurance policy on the life of Albert with Belle as the designated beneficiary. Upon Rachel's death, nothing regarding this policy is included in her gross estate.
False The replacement value of an un-matured policy should be included.
At the time of her death, Rita held a promissory note from a loan she had made to her son. If Rita's will forgives the loan, the noter is not included in her gross estate.
False The value of the note is included in Rita's gross estate.
Setting up a trust to benefit a minor can:
Gain an annual exclusion even though no present interest is conveyed Protect the donor against the minor's unwise use of the funds Accumulate income for future use, like college tuition.
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.
True Lyle make all of the contribution to the cost of the land while Kelly contributed nothing.
Manuel, a citizen and resident of Argentina, makes a gift to his children of a ranch located in Colorado. Manuel will be subject to the USD gift tax.
True NRAs are subject to the Federal gift tax as to transfers of property located in the US.
Ray purchases US 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 form this situations.
True No gift results from the purchase. As Donna had no vested interest in the bonds, no estate tax consequences ensure upon her death.
Some states impose inheritance taxes, but the Federal tax system does not.
True Not all states impost an inheritance tax, but the Federal tax on transfers by death is an estate tax
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.
True Ownership as joint tenancy carries the right of survivorship
Matt and Patricia are husband and wife and live in Oregon. In 2000 and using her funds, Patricia purchases a residence for $400,000, listing title to the property as "Matt and Patricia, joint tenants with right of survivorship.". In 2018, Matt dies first when the residence is worth $2 million. A correct statement as to these transactions is: a. In 2018, Matt's gross estate includes $1 mil and a martial deduction of $ 1 mil is allowed for estate tax purposes b. In 2000, Patricia made a gift to Matt but no martial deduction is available for gift tax purposes c. In 2000, Patricia did not make a gift to Matt d. In 2018, Matt's estate includes nothing as to the property e. None of the above
In 2018, Matt's gross estate includes $1 mil and a martial deduction of $ 1 mil is allowed for estate tax purposes
In determining whether a dividend issued on stock held by a decedent is included in the gross estate, the record date (rahter than the declaration or paymenet dates) controls.
True Record date controls
In 2017, Dulcea dies reporting a taxable estate of $2 mil. In prior years, Dulcea's taxable gifts totaled $4.49 mil. How is the exclusion amount applied?
In a cumulative manner, such that her lifetime and at-death taxable asset transfers amount to $6.49 mil, and a Federal estate tax is due on $1 mil.
In 2017, Sanjay makes a taxable gift of $2,000,000. In prior years, Sanjay's taxable gifts totaled $4.49 mil. How does the exclusion amount apply?
In a cumulative manner, such that his lifetime taxable gifts amount to $6.49 mil and a Federal gift tax is due on $1 mil.
In 2017, grandparents contribute jointly owned funds to a 529 qualified tuition plan on behalf of their granddaughter. The maximum annual exclusion allowed to them is $140,000 (14,000 x 2 (number of donors) x 5 (number of years allowed)
True Since the funds are jointly owned, two donors are involved. Consequently, the maximum annual exclusion becomes $140,000 (14,000 x 2 (number of donors) x 5 (number of years allowed)
Mark dies on March 6. Which, if any, of the following items is not included in his gross estate? a. Interest earned (before death) on City of Cleveland bonds b. Cash dividend on stock owned by Mark - declaration date was February 4, and record date was March 4. c. Federal income tax refund for a prior tax year - received on March 5. d. Insurance recovery on auto accident that occurred on February 25. e. Insurance recovery from theft of sailboat on March 7.
Insurance recovery from theft of sailboat on March 7.
Iris dies intestate (without a will). All of her property passes to her heirs in accordance with the order of distribution prescribed under applicable state law.
True State, not Federal, law controls the order of distribution. Only the property in her probate estate is subject to these rules.
The Federal unified transfer tax credit: a. Is indexed annually b. Applies only to the estate tax c. Is a different amount for the estate and gift taxes d. Is doubled on a joint gift tax return
Is indexed annually
At the time of his death, Gene held a Roth IRA account with his wife as the designated beneficiary. The IRA is included in Gene's gross estate.
True The Roth IRA is included in the gross estate under 2033
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.
True The death of the beneficiary of an un-matured life insurance policy carries no tax consequences.
In which of the following independent situations has Jean made a gift? a. Jean gives her 10-year old son $20,000 to be used by him for his college expenses. b. Jean buys her non-dependent grandfather a new $120,000 RV for his birthday c. Jean sens $14,000 to Temple University to cover her nephew's tuition. The nephew does not qualify as Jean's dependent. d. Jean contributes $10,000 to her US Senator's reelection campaign.
Jean buys her non-dependent grandfather a new $120,000 RV for his birthday
Ling and Jiang are unrelated and equal joint tenants in a plot of land. Ling died this year. Ling's share of the land goes to:
Jiang, under community property principles.
Lila is the owner and beneficiary of a policy on the life of her husband, Austin. Upon Austin's death, the insurance proceeds paid to Lila do not qualify for the martial deduction.
True The proceeds are not included in Austin's gross estate, they do not satisfy the passing requirement, and no deduction is allowed.
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.
True Under 2013, the full credit is allowed if the transferee's death occurs within 2 years of the transferor's death.
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.
True Unpaid taxes that are paid by the estate can be deducted under 2053 to arrive at a decedent's taxable estate.
The election of the alternate valuation date can affect the amount of a charitable dedution allowed to an estate for a bequest to a qualified charity.
Ttue It would not if a cash bequest is involved, but it could if property was the subject of the transfer
Maritsol owns a building in an equal joint tenancy with Jada. While both individuals are living, Marisol can make a gift of her half of the property to Willie. But if Marisol dies and Jada survives what happens to Marisol's interest in the building?
Marisol's one-half interest in the builfing passes to Jada automatically under state law, in the form of the survivorship feature of the joint tenancy. At that point, Marisol can no longer pass her half of the building to Willie, and a clause in Marisol's will that transfers a hald interest to Willie is invalid.
The Federal transfer taxes are applied in a manner that is
Unified among the taxes AND Cumulative over the individual's lifetime
In which, if any, of the following independent situations can alternate valuation date be elected?
Valuation of Gross Estate: Date of Death: 6,100,000 Alternate Date: 6,000,000 Estate Tax Result: Date of Death: $390,000 Alternate Date: $380,000 Both of the value of the gross estate AND the estate tax must be lower on the alternate valuation date for the § 2032 election to be available.
Peter sells Bob some real estate for $40,000. Unknown to Peter, the property contains valuable mineral deposits and is really worth $200,000. Was a gift made by Peter to Bob?
No, it was a bad business decision but a gift of $160,000 was not made
In 2017, Janet makes a taxable gift of $5.49 million, the first taxable gift that she ever has made. Does Janet owe any Federal gift tax for the year?
No. As computed under the tax code, the federal gift tax on $5.49 million is $2,141,800 which is the exact amount of the credit allowed, so no net transfer tax is due. 5,490,000 - 1,000,000 * 40% + 345,800
Dudley buys a 12-month CD from State Bank and lists ownership as follows: "Dudley, payable on proof of death to Faye." Nine months later, Dudley dies. When the CD matures, Faye collects the proveeds from State Bank. Has a gift occurred?
No. When Dudley invests in the CD, Faye has received a mere expectancy. At any time before his death, Dudley may withdraw the funds or delete Faye's name from the account, thereby cutting off her expectancy. No gift occurs upon Dudley's death either as the CD passes to Faye as "payable upon death."
At the time of his death, Jason was a participant in Silver Corporation's qualified pension plan and group term life insurance. The balance of the survivorship feather in his pension plan is: Contributions by Silver: $800,000 After-tax contribution by Jason: 400,000 Plan earnings: $300,000 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 be include $1,200,000 d. Jason's gross estate must include $1,500,000
Pam must pay incocme tax on $1,100,000 $800,000 (employer's contributions) + 300,000 (plan earnings) Insurance proceeds are not subject to income tax. Jason's gross estate includes $1,600,000 (800,000 + 400,000 + 300,000 + 100,000)
Julie transfers some shares to Patti and receives nothing in return. Is this a gift to Pattie?
Yes, Julie has made a gift to Patti in the amount of the FMV of the stock. Julie is the donor and Pattie is the donee.
If Marisol and Jada own a building togther as tenants in commons or as community property, can Marisol pass her one-half to Willie?
Yes, Marisol can pass her half of the asset to Willie as a lifetime gift or as a bequest at death, as no right of survivorship exists under state property tax.
Grace loans money to Debby in connection with a business venture. About a year later, Grace forgives part of the loans. Was that a gift to Debbie?
Probably not if she and Debby are unrelated parties.
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 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 her prior tax year. e. None of the above
Rents for the month of March (received May 2) on an apartment building she owned.
In which of the following situations is Polly's property ownership interest not lost by her death? a. Tenancy by the entirety b. Tenancy in common c. Joint tenancy d. All of teh above
Tenancy in common For the other choices, a right of survivorship automatically applies.
Stacy inherits unimproved land (FMV of $6 million) from her father on June 1, 2017. Stacey disclaims her interest in the property as follows: 1/3 on December 1, 2017; 1/3 on January 3, 2018; and the remaining 1/3 on May 31, 2018. In all cases, the disclaimers pass the interest to her son. The Federal gift tax applies to Stacey for:
The May 31, 2018 disclaimer The gift tax applies only to the disclaimer made on May 31, 2018 since it is after the allowed 9 month grace period.
Which, if any, of the following is not a characteristic of the Federal gift tax? a. A charitable deduction is available b. The alternate valuation date of 2032 can be elected c. A disclaimer procedure may avoid the tax d. A marital deduction is available e. None of the above
The alternate valuation date of § 2032 can be elected. The § 2032 election applies only to the estate tax.
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: a. $0 if Emma died 9 1/2 years after Corey b. $300,000 if Emma died 3 years after Corey c. $400,000 if Emma died 1 year after Corey d. $240,000 if mma died 5 1/2 years after Corey e. The credit is computed is come other amount
The credit computed is some other amount 9 1/2 years - 300,000 x 20% = $60,000 3 years - 300,000 x 80% = $240,000 1 year - 300,000 x 100% = $300,000 5 1/2 years - 300,000 x 60% = $180,00
Concerning the Federal estate tax deduction for asset transfers to charity: a. The deduction is allowd only if the decedent had a valid will b. A deduction is allowed for a gift to the cemetery association c. A deduction is disallowed if the gift is made to the United Way of Bosnia d. All of the above statements are true
The deduction is allowed only if the decedent had a valid will
Concerning the election to split gifts, which of the following statements is incorrect? a. The election can be made even if the parties are not married for the entire year of the gift b. The election doubles the number of annual exclusions available c. The election has no utility in a community property jurisdiction d. The election can be made even if the parties are divorced as long as neither spouse has remarried by the end of the year.
The election has no utility in a community property jurisdiction As long as the parties are married at the time of the gift and have not remarried by the end of the year, a divorce does not preclude the election.
Which, if any, of the following statements correctly reflects the rules applicable to the alternate valuation date? a. The election is made by the executor b. Can be elected even though no estate tax return has to be filed. c. Can be elected only if it reduces the amount of the gross estate or reduces the estate tax liability d. Its election does not affect the income tax basis of property included in the gross estate.
The election is made by the executor
By a lifetime gift, Ron transfers proeprty to a trust with a life estate (with income payable annually) to June and remainder upon June's death to Albert. Ron has made two gifts when the trust was created; one to June of a life estate and one to Albert of a remainder interest. Do these gifts qualify for the annual exclusion?
The life estate is a present interest and qualifies for the annual exclusion. Albert's remainder is a future interest and does not qualify for the exclusion.
Concerning the Federal tax on generation-skipping transfers: a. The tax applies in addition to any applicable gift of estate tax b. The tax applies in lieu of any applicable gift or estate tax c. The tax is applies at a flat 33% tax rate d. The annual gift tax exclusion cannot be used to reduce the tax
The tax applies in addition to any applicable gift or estate tax
