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Exam 27: The Federal Gift and Estate Taxes

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Question 31

Multiple Choice

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Classify each of the following statements. -Cash donation to the reelection campaign of a candidate for the U.S. House.

A) No taxable transfer occurs.
B) Gift tax applies.
C) Estate tax applies.

D) All of the above
E) A) and B)

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Question 32

Multiple Choice

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In 2010, Drew creates an irrevocable trust with $1,000,000 of securities. Under the terms of the trust, Paula (Drew's wife) is granted a life estate with remainder to 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 2020 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 2020.
C) Drew does not get a marital deduction in 2010.
D) All of the value of the trust ($2,000,000) is included in Paula's gross estate when she dies in 2020.

E) None of the above
F) All of the above

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Question 33

Multiple Choice

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Classify each of the following statements. -Meg gives her 18-year-old son money for his college tuition and living expenses (e.g., room and board) .

In 2018, Thalia purchased 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 2020, April and Theresa purchase an apartment building for $1 million as equal tenants in common; April furnished $400,000 and Theresa furnished $600,000 of the cost. April died before Theresa in 2021 when the land is worth $1.5 million and the apartment building is worth $2 million. One of the results of these transactions is:

Walt dies intestate (i.e., without a will) in the current year with a gross estate valued at $4,000,000. Under applicable state law, Walt's property passes to Kelly and to Belle in that order. Kelly has an estimated net worth of $3,000,000 while Belle's is zero. From a tax planning standpoint, what course of action might be advisable?

Classify each statement appropriately. -Mortgage on land included in gross estate and willed to decedent's children.

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 feature in his pension plan is that: $\begin{array}{ll}\text { Contributions by Silver } & \$ 800,000 \\\text { After-tax contributions by Jason } & 400,000 \\\text { Plan earnings } & 300,000\end{array}$ 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:

To make the election to split gifts, spouses must file a Form 709 (Federal gift tax return).

For Federal estate and gift tax purposes, the exemption equivalent is the same thing as the exclusion amount.

The Federal gift tax does not include a:

At the time of Clint's death, part of his estate consists of the following. ∙ Roth IRA (value of $1,000,000) with Jennifer as the designated beneficiary. ∙ Land (worth $3,000,000) held in joint tenancy with Jennifer. Jennifer is Clint's wife and originally furnished the purchase price. ∙ Building (worth $3,000,000) held as equal tenants in common with Jennifer and Dana. Dana is Clint's mother, and she originally purchased the property. Under Clint's will, all of his property passes to his wife, Jennifer. How much marital deduction is Clint's estate allowed? Clint and Jennifer live in Tennessee.

Which, if any, of the following is a characteristic of the Federal estate tax?

Kim, a resident and citizen of Korea, dies during an operation at the Mayo Clinic in Rochester (MN). Because Kim died in the United States, she will be subject to the Federal estate tax.

Match each statement with the correct choice. Some choices may be used more than once or not at all. -Alternate valuation date

An individual generally tries to reduce the present value of any Federal transfer tax liability.

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.

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 marital deduction.

Match each statement with the correct choice. Some choices may be used more than once or not at all. -QTIP election

Match each statement with the correct choice. Some choices may be used more than once or not at all. -Credit for tax on prior transfers

Classify each statement appropriately. -State income taxes accrued prior to death.