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Exam 27: The Federal Gift and Estate Taxes

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Question 81

True/False

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The use of the election to split gifts under § 2513 is not necessary for spouses who make gifts of their community property.

A) True
B) False

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Question 82

True/False

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Harry and Brenda are husband and wife. Using her funds, Brenda purchases real estate which she lists as: "Harry and Brenda, tenants by the entirety with right of survivorship." If Brenda dies first, all of the value of the real estate will be included in her gross estate.

A) True
B) False

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Question 83

Multiple Choice

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Classify each statement appearing below. -Homer purchases a U.S. savings bond listing title as: "Homer, payable to Bernice upon Homer's death." Bernice is Homer's sister. Homer dies four years later, and Bernice cashes in the bond and keeps the proceeds.

Classify each of the independent statements appearing below. -Proceeds of an insurance policy on decedent's life. Decedent's son purchased the policy and is its owner and beneficiary.

At the time of her death, Rita held a promissory note from a loan she had made to her son. If Rita's will forgives the loan, the note is not included in her gross estate.

At the time of her death, Audrey was (or had been) involved in the following trust arrangements. As to these trusts, how much is included in Audrey's gross estate? -Trust A. Created by Audrey ten years ago as a revocable trust with $1 million in assets. The trust provides for a life estate to Audrey, remainder to her children. Two years ago and when the trust was worth $5 million, Audrey released her power to revoke. When Audrey died, Trust A's assets are valued at $5.1 million. -Trust B. Created by David's will (Audrey's late husband) and provides for a life estate to Audrey, remainder to her children. David's estate made a QTIP election. Trust B was worth $2 million when created and $3 million when Audrey died. -Trust C. Created by Audrey five years ago, provides for a life estate to Audrey's children, remainder to their children (i.e., Audrey's grandchildren). Trust C was worth $1.5 million when created and $2.4 million when Audrey died.

In the past, the amount of the unified tax credit always has been the same for both transfers by gift and transfers by death.

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

In which, if any, of the following independent situations has Jean made a gift?

Which, if any, of the following is a correct statement regarding the filing of a gift tax return (Form 709) ?

Classify each statement appropriately. -State death tax imposed on the estate.

Homer and Laura are husband and wife. At the time of Homer's prior death in 2013, they owned the following: land as tenants by the entirety worth $2,000,000 (purchased by Homer) and stock as equal tenants in common worth $3,000,000 (purchased by Laura) . Homer owns an insurance policy on his life (maturity value of $1,000,000) with Laura as the designated beneficiary. Homer's will passes all his property to Laura. How much marital deduction is allowed Homer's estate?

Barry pays State University for his dependent daughter's room and board. Barry has made a transfer that is subject to the Federal gift tax.

Classify each statement appropriately. -Payment by the estate of church pledge made by decedent prior to death.

Classify each statement appearing below. -Maggie purchased an insurance policy on Jim's life and designated Susan as the beneficiary. Four years later Jim dies, and Susan collects the insurance proceeds.

In 2005, Thalia purchases 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 2007, 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 dies first in 2013 when the land is worth $1.5 million and the apartment building is worth $2 million. One of the results of these transactions is:

Classify each statement appearing below. -Hugh loans his adult daughter, Nadia, $800,000 to start her own business. No interest is provided for, and Nadia signs a note that is payable in four years.

Classify each of the independent statements appearing below. -Dower interest claimed by decedent's surviving spouse.

At the time of her death, Megan was involved in the following. -Owned an insurance policy on the life of her father with a replacement cost of $250,000 and maturity value of $800,000. The designated beneficiary of the policy is Megan's estate. -Was an equal tenant in common with her brother in a tract of land worth $800,000. The land was inherited from their grandmother 10 years ago when it had a value of $200,000. -Was a joint tenant with her two sisters in stock worth $1,500,000. The stock was inherited from their grandmother 10 years ago when it had a value of $500,000. As to these transactions, Megan's gross estate must include:

What is the justification for the terminable interest rule that is applicable to the marital deduction?