Chapter 10

Seth, a U.S. citizen, owns a life insurance policy on his own life. His latest statement from the life insurance company revealed the following: Death Benefit $1,000,000 Cash Value $200,000 Beneficiary Designation Sonia (his wife) If Seth died today, and the insurance proceeds were paid to his wife, Sonia (a resident alien), what amount will qualify for the estate tax marital deduction?

$0

Nine months ago, Bonnie gave land to Ron. At the date of gift, the land had a fair market value of $400,000 and an adjusted taxable basis to Bonnie of $250,000. Ron died bequeathing all of his property to Bonnie. If the land had a fair market value of $450,000 on the date of Ron's death, what is Bonnie's adjusted taxable basis in the land?

$250,000. -Adjusted basis of the land with no step up.

Which of the following statements regarding the estate tax marital deduction is correct?

A QTIP trust will qualify for the marital deduction, if the executor makes the appropriate election.

Maria is a citizen and resident of Mexico. She was married to Jose, a U.S. citizen, and is his sole survivor. Which of the following techniques or arrangements would be useful if his gross estate is $15,000,000?

A Qualified Domestic Trust (QDOT).

Only property that passes from the deceased spouse to the surviving spouse is eligible for the marital deduction. Which of the following will not qualify for the estate tax marital deduction?

A terminal interest in property.

A QTIP trust must:

Give the surviving spouse the right to require only income producing assets be in the trust.

Which of the following is not an advantage of the marital deduction?

If the first spouse to die took full advantage of the marital deduction, all property in the surviving spouse's estate at his or her death is subject to the federal estate tax.

Bob and Ted are married and live in California, a community property state. Their community property consists of real property with an adjusted basis of $300,000 and a fair market value of $750,000 and other property with an adjusted basis of $100,000 and a fair market value of $75,000. Bob dies and leaves his entire estate to Ted. What is Ted's adjusted basis in the real property and other property after Bob's death?

Real Property: $750,000. Other Property: $75,000.

Which statement about the gift tax marital deduction is incorrect?

The regular annual exclusion available to all donees is available for gifts to non-citizen spouses.

The marital deduction is:

Unlimited.