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Exam 25: Transfer Taxes and Wealth Planning

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Question 21

True/False

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A gift tax return does not need to be filed unless the taxpayer has made current gifts in excess of the applicable credit.

A) True
B) False

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Question 22

True/False

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Proceeds of life insurance paid to the decedent's estate due to the death of the decedent are included in the decedent's gross estate even if the decedent had no ownership rights in the policy at the time of death.

A) True
B) False

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Question 23

Multiple Choice

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At his death Trevor had a probate estate consisting of $4 million of property. Which of the following is a true statement about Trevor's estate or estate tax?

Adrian owns two parcels of real estate. Parcel #1 is worth $400,000 and Parcel #2 is worth$660,000. Adrian plans to bequeath Parcel #1 directly to his spouse Sofia and leave her a life estate in Parcel #2. What amounts will be included in Adrian's taxable estate for these two parcels?

When a gift-splitting election is made, gifts made by either spouse during the year will be treated as if each spouse made one-half of the transfer.

Christopher's residence was damaged by a storm during the administration of his estate.Christopher's executor paid $120,000 to repair the residence after the storm. Which of the following is a true statement?

The gross estate may contain property transfers that are not included in the probate estate.

This year Alex's friend, Kimberly, was disabled. Alex paid $25,000 to Kimberly's doctor for medical expenses. In addition, Alex also paid $15,000 to Kimberly directly so that her son could affordtuition at State University this year. Has Alex made taxable gifts, and if so, in what amounts?

A serial gift strategy consists of arranging a trust to maximize the value of the applicable credit.

The exemption equivalent was repealed in 1976.

The marital and charitable deductions are common to both the estate tax and the gift taxformulas.

Which of the following statements is (are) true?

This year Maria transferred $600,000 to an irrevocable trust that pays equal shares of incomeannually to four cousins (or their estates) for the next eight years. At that time, the trust is terminated and the corpus of the trust reverts to Maria. Determine the amount, if any, of the current gifts andthe taxable gifts if the relevant interest rate is 6 percent and Maria is married and elects to gift-splitwith her spouse?

A transfer of a terminable interest will not generally qualify for a marital deduction.

Both spouses must consent to any gift-splitting election.

Ryan placed $280,000 in trust with income to Stephen for his life and the remainder to Kayla (or her estate). At the time of the gift, given the prevailing interest rate, Stephen's life estate was valued at$165,000 and the remainder at $115,000. What is the amount, if any, of Ryan's taxable gifts?

Including adjusted taxable gifts in the taxable estate causes these gifts to be taxed twice, once under the gift tax and again under the estate tax.

A gratuitous transfer of property made during the lifetime of the donor is called:

A transfer of cash to a bank account held in joint tenancy with the right of survivorship is not a completed gift.

Adjusted taxable gifts are added to the taxable estate to accomplish which of the following objectives?