Gift and Estate Tax

A. To make a gift of a life insurance​ policy, Antonio must irrevocably transfer all incidents of ownership in the policy to another party.

Antonio would like to make a gift of a life insurance policy. Explain to him what action he must take to make a completed gift. A. To make a gift of a life insurance​ policy, Antonio must irrevocably transfer all incidents of ownership in the policy to another party. B. The policy needs to be term life and Antonio needs to name a primary beneficiary to his life insurance policy. C. Gifting life insurance policies is easy since Antonio just has to ensure primary and secondary beneficiaries are designated in the policy. D. Antonio cannot gift his life insurance policy since the policy will trigger immediate tax to the donor.

purposes. B. ​(1) The same tax rates apply for both gift and estate tax​ purposes, and​ (2) they are combined into one maximum credit amount in 2011 or later.

Describe two ways in which the transfer tax​ (estate and gift​ tax) system is a unified system. A. ​(1) Both taxes have a unified credit amount of​ $345,800, and​ (2) the same tax rates apply for both gift and estate tax purposes. B. ​(1) The same tax rates apply for both gift and estate tax​ purposes, and​ (2) they are combined into one maximum credit amount in 2011 or later. C. ​(1) If gifts are made in the year estate tax​ applies, the gifts are pulled into the​ estate, and​ (2) both taxes have a unified credit amount of​ $345,800. D. ​(1) If gifts are made in the year estate tax​ applies, the gifts are pulled into the​ estate, and​ (2) they have the same maximum credit amount in 2010 or later.

C. False. Due to the unified​ credit, relatively large taxable gifts can be made before a gift tax liability is triggered.

Determine whether the following statement is true or​ false: Every donor who makes a taxable gift incurs a gift tax liability. Explain your answer. A. False. The unified credit affects the estate​ tax, not the gift tax burden. B. True. As donors make gifts triggering a taxable gift for the​ year, tax will be due for that year. C. False. Due to the unified​ credit, relatively large taxable gifts can be made before a gift tax liability is triggered. D. True. The unified credit assists in slightly lowering the gift tax burden. Only once the yearly unified credit amount is​ used, however.

C. Yes. Under Sec.​ 2503(e), the direct payment of tuition expenses is exempt from gift treatment regardless of for whom the payment is made.

Does the exemption from the gift tax for direct payment of tuition encompass payments of​ non-relatives' tuition? Explain. A. Yes. The exemption is available providing the payment of tuition expenses does not exceed​ $20,000 a year. B. No. Only indirect payments​ (those made to the​ non-relative and then paid to the​ institution) are exempt from the gift tax. C. Yes. Under Sec.​ 2503(e), the direct payment of tuition expenses is exempt from gift treatment regardless of for whom the payment is made. D. No. Under Sec.​ 2503(e), the direct payment of tuition expenses are exempt only if the payments are for​ related-parties (i.e.​ relatives).

B. Congress enacted the annual exclusion for administrative simplicity to keep​ "routine" gifts from needing to be reported for gift tax purposes.

What is the purpose of the gift tax annual​ exclusion? A. The annual exclusion ensures that no one will exceed their total lifetime unified credit. B. Congress enacted the annual exclusion for administrative simplicity to keep​ "routine" gifts from needing to be reported for gift tax purposes. C. Congress only considers​ "extreme" gifts to be counted in the gift tax annual exclusion. Other​ "routine" gifts such as for​ birthdays, wedding and Christmas gifts are always reported. D. Both A and B are correct.

C. Congress enacted gift splitting to allow for equitable treatment of donors living in common law states in comparison with donors living in community property states.

What was the Congressional purpose for enacting the​ gift-splitting provisions? A. Congress enacted the gift splitting election for donors to file and pay tax on their separate income tax returns. B. Congress enacted gift splitting for donors living in community property states to file and pay tax on their separate income tax returns. C. Congress enacted gift splitting to allow for equitable treatment of donors living in common law states in comparison with donors living in community property states. D. Congress enacted gift splitting to allow for the tax to be paid over a two year period providing the donors live in a common law state.