LGS 403 Exam 3

Which of the following statements does/do not correctly pertain to the unified credit? The credit is available to offset both inter-vivo gifts and testamentary transfers. Use of the unified credit is mandatory for all taxable inter-vivos gifts. The unified credit offsets the gift tax and the estate tax to reduce tax liability. The unified credit is also known as the "exemption equivalent amount."

The unified credit is also known as the "exemption equivalent amount"

Lynne transferred $1 million into a trust for the benefit of her husband Kiron, age 36, and her young daughter Beth. Kiron will receive all income for life and Beth will receive the remainder interest. Using IRS Valuation Table S for a single life with a 6% interest rate, what is the value of the taxable gift Lynne made to Kiron, assuming no election is made? Annuity Life Estate Remainder 14.7060 0.88236 0.11764

$868,360

From the following options, identify which gifts are subject to the gift tax law.

1. A mother changed the deed to her home to give her son a remainder interest in the property 2. An author gave his right to future royalties to his daughter.

Which of the following statements concerning the estate tax and estate transfers to minors is incorrect? Parents who gift their children appreciating assets remove the value of the assets and the future appreciation form their gross estates. Taxable gifts made to minors are included in the donor's estate as an adjusted taxable gift. A parent who front-loads a 529 plan with a $70,000 contribution and dies four years later will have the plan's entire account balance included in his gross estate A decedent's executor can transfer property from the estate into a UTMA account.

A parent who front-loads a 529 plan with a $70,000 contribution and dies four years later will have the plan's entire account balance included in his gross estate

Tony has a gross estate of $5.5 million. He wants to gift some property to his daughter Paula to reduce the value of his gross estate at death. Which property should Tony gift?

A vacation home worth $600,000 that Tony inherited from his father at a basis of $100,000. Paula and her family vacation there every year and would never sell the home.

Which of the following techniques are available to parents to shift wealth and income to their children? Transfer growth stock mutual funds into a UGMA account. Make an outright gift of a Series EE bond to a child that will not mature until after the child attains age 18. Transfer non-income-producing assets into a Section 2303(b) trust for the benefit of several minor beneficiaries Transfer tax-free municipal bonds to a minor that will mature after the child's 24th birthday.

Transfer growth stock mutual funds into a UGMA account. Make an outright gift of a Series EE bond to a child that will not mature until after the child attains age 18. Transfer tax-free municipal bonds to a minor that will mature after the child's 24th birthday.

Craig owns an apartment building that has appreciated substantially in the last several years. He wants to remove this property and all future appreciation from his sizable estate by transferring the building to his 8 year old son, Tucker. Craig does not want the income from the apartment rentals distributed to Tucker now, but he wants Tucker to take ownership of the building and the undistributed income when he turns 21. Their state's statutory age of majority is age 18. How should Craig transfer the building to Tucker?

Transfer the building into a 2503(c)

Which of the following statements is/are incorrect? A direct gift is an outright transfer of real or personal property. A transfer of $1 million into an irrevocable trust is an indirect gift made to the trust beneficiaries. Transferred property is valued for gift tax purposes on the date the completed gift is made, or on the alternate valuation date. When someone receives the remainder interest in an irrevocable trust, he has received a future interest gift.

Transferred property is valued for gift tax purposes on the date the completed gift is made, or on the alternate valuation date.

Adrian has mad the following gifts this year. Which gift qualifies for the annual exclusion? Adrian paid for his nephew's tuition at a private high school Adrian established a $1 million irrevocable trust for his twin sons. The bank trustee has the discretion to distribute income to each child prior to age 35, at which time the trust corpus will be distributed to them. Adrian transferred artwork valued at $500,000 into an irrevocable trust for his sister. Adrian transferred $2 million of municipal bonds into an irrevocable trust for his wife, who is the sole beneficiary. His wife has unrestricted use of the trust assets.

Adrian transferred $2 million of municipal bonds into an irrevocable trust for his wife, who is the sole beneficiary. His wife has unrestricted use of the trust assets.

Grandmother is a widow. she has a bank account with $400,000 in her name. She adds granddaughter as a joint owner of this account with right of survivorship. Which of the following statements best describes the estate planning consequences associated with grandma's action?

At GM's death, this account will not be subject to probate.

Which of the following is an income tax ramification associated with simple trusts?

Because all income is required to be paid, the trust beneficiary is subject to income tax liability

Elliot and Jean jointly established a trust for their children: Rachel, 18; and Greg, 21. All income will be distributed to Rachel for the next 6 years to pay for her undergraduate and graduate school expenses. Greg will receive the remainder interest in the trust. Which of the following statements is/are correct?

Elliot and Jean have established a 2503(b) trust.

Gordon creates an irrevocable trust into which he transfers income-producing property. the trust provides income to his children for life, remainder to the grandchildren. Gordon has appointed his wife sophia as the trustee of the trust. Sophia, as the trustee, is given the power to apply trust income to purchase life insurance on Gordon's life. Who is responsible for the payment of the income tax liability attributed to the trust income?

Gordon, as the grantor of the trust.

Jonathan made the following gifts to his wife, Kristen, and son, Silas, this year. Which gift does not qualify for the gift tax marital deduction? Jonathan gave Kristen a remainder interest in his montana ranch Jonathan transferred $3 million of securities into an irrevocable trust. Kristen will receive all income for life, and Silas will receive the remainder interest. The trust gives Kristen the right to invade the corpus without restrictions Jonathan established an irrevocable trust and funded it with $2,500,000. Kristen will receive the income for 10 years, and Silas will receive the remainder interest. Jonathan transferred $6 million into an irrevocable trust that gives Kristen a qualifying income interest for life. Silas will receive the remainder interest in the trust. Jonathan made a QTIP election on his gift tax return.

Jonathan established an irrevocable trust and funded it with $2,500,000. Kristen will receive the income for 10 years, and Silas will receive the remainder interest.

All of the following are items of IRD except: 1. Unpaid life insurance commissions 2. Unpaid life insurance cash value 3. Life insurance death benefit proceeds

Unpaid life insurance and Life insurance death benefit proceeds

Martin recently inherited property from his father. Martin and his wife Regina jointly made cash gifts of $200,000 to their son this year. This is the first taxable gift they have ever made. Which of the following statements is/are correct? Martin and Regina each made taxable gifts of $86,000 this year. Martin, the donor spouse, will file a gift tax return, and regina will indicate her consent to gift split on his IRS form 709. Martin and Regina each has $2,031,800 of their unified credit remaining. When Martin and Regina die, $86,000 will be added into their estate tax return as an adjusted taxable gift.

Martin and Regina each made taxable gifts of $86,000 this year. When Martin and Regina die, $86,000 will be added into their estate tax return as an adjusted taxable gift.

Which of the following income tax considerations is correct with respect to a trust beneficiary?

When income is distributed to a trust beneficiary, it will be taxed to the trust beneficiary

Identify transfers that are included when determining taxable gifts. You cancelled a $1,000 debt from your brother. You added your daughter's name to the deed to your house. You added your son's name to your checking account. You established a revocable trust and named your spouse as beneficiary.

You cancelled a $1,000 debt from your brother. You added your daughter's name to the deed to your house.

Tara is 18 years old and a senior in high school. Her parents' marginal tax bracket is 25%, and Tara's tax bracket is 10%. Suppose that Tara earned $3,000 of interest income in her UTMA last year. What is Tara's total tax liability for 2015?

Tara would pay $330 in tax.

Which of the following accurately describes the tax ramifications associated IRD assets?

The beneficiary of the item of IRD receives a deduction for the estate tax attributed to the item

A donor makes a gift to a donee. Which of the following statements is/are correct with respect to the basis of the property? The donee acquires the donor's basis as long as the property is transferred at a gain. The donor's basis is always carried over to the donee. The donor's basis is always carried over if the property is transferred at a loss. The donee's basis is equal to the FMV of the property on the date of the transfer.

The donee acquires the donor's basis as long as the property is transferred at a gain.