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Exam 25: Transfer Taxes and Wealth Planning

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Question 41

Multiple Choice

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The applicable credit is designed to:

A) exclude up to $14,000 per individual per year on any individual transfer.
B) prevent taxation of cumulative transfers that do not exceed a certain minimum amount.
C) apply only to taxable transfers included in the gross estate.
D) apply to amounts not already eliminated by the exemption equivalent.
E) None of the choices are correct.

F) B) and E)
G) A) and C)

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Question 42

Multiple Choice

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At her death Emily owned real estate worth $2.5 million and other property worth $1 million. Property taxes of $200,000 were accrued on the real estate at the time of Emily's death. Which of the following is a true statement with respect to these items without considering any other owned property?

A) Emily's adjusted gross estate is $3.3 million.
B) Emily's estate tax base is $3.5 million.
C) Emily's taxable estate is $3.5 million.
D) Emily's gross estate is $3.3 million.
E) None of the choices are true.

F) B) and D)
G) All of the above

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Question 43

Multiple Choice

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At his death Jose owned real estate worth $22 million but subject to a mortgage of $7 million. Which of the following is a true statement?

Which of the following is a true statement?

This year, Brent by himself purchased season baseball tickets in the exclusive sky club.The price of the tickets was $60,000, and Brent divided the tickets equally with his two brothers (Brent gave one-third of the tickets to each brother) . Has Brent made a taxable gift and, if so, in what amount?

Christian transferred $60,000 to an irrevocable trust for the benefit of his threedaughters. The three daughters share income equally for five years and then the corpus of the trust is to be divided equally between them. What is the amount of the taxable gifts,if any, made by Christian?

A couple who is married at the time of completing a gift can elect to file a joint gift tax return.

The applicable credit is designed to allow a minimum amount of lifetime transferswithout triggering the imposition of a transfer tax.

The generation-skipping tax is designed to accomplish which of the following?

Jonathan transferred $90,000 of cash to a trust this year for the benefit of Hannah, age10. The trustee has the discretion to distribute income or corpus (principal) for Hannah's benefit and is required to distribute all assets to Hannah (or her estate) not later than Hannah's 21st birthday. What is the amount of the taxable gift?

Matthew and Addison are married and live in Michigan, a common-law state. For the holidays Addison gave cash gifts of $30,000 to each of her two sons, and Matthew gave$40,000 to his daughter. What is the amount of Addison's taxable gifts if Matthew andAddison opt to gift split?

Andrew and Brianna are married and live in Texas, a community property state. For their birthdays this year Andrew gave cash gifts of $20,000 to each of his two daughters, and Brianna gave $30,000 to her niece. What is the amount of Andrew's taxable gifts?

The Federal transfer taxes are calculated using cumulative lifetime transfers.

The annual exclusion applies to cumulative gifts made to each donee over the course of the year.

Andrea transferred $500,000 of stock to a trust, with income to be paid to her niece for 20 years(value $125,000) and the remainder to her nephew (value $375,000). Andrea named a bank asindependent trustee but retained the power to determine how much income, if any, will be paid in any particular year. What is the amount of the taxable gift, if any? Explain your answer.

A gratuitous transfer of cash made directly to an individual who uses the entire amount of the cash to pay medical expenses is not subject to a gift tax.

Last year Brandon opened a savings account with a deposit of $45,000. The account was in the name of Brandon and Melanie, joint tenancy with the right of survivorship. Melanie did notcontribute to the account, but this year she withdrew $18,000. Has Brandon made a taxable gift toMelanie, and if so, in what amount?

This year Nathan transferred $2 million to an irrevocable trust established for the benefit of his nephew. The trustee is directed to accumulate income for the next 5 years before distributing the trust corpus to Nathan's nephew. In past years Nathan has made taxable gifts of $6 million and used an applicable credit on an exemption equivalent of $5 million. What amount of gift tax, if any, must Nathan remit?

A future interest is a right to receive income or property in the future.

Tracey is unmarried and owns $7 million in stock and bonds. What is the result if Tracey dies this year and leaves all of her property to a qualified charity?