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Exam 14: Transfer Taxes and Wealth Planning

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Question 41

True/False

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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.

A) True
B) False

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Question 42

Multiple Choice

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A applicable credit is subtracted in calculating both the gift tax and the estate tax.Why doesn't this calculation have the effect of increasing the total applicable credit amount?

A) The tentative estate tax is reduced by only taxes payable on adjusted taxable gifts rather than gross gift taxes.
B) The applicable credit only offsets the exemption equivalent.
C) The applicable credit cannot be used to offset gift taxes on adjusted taxable gifts.
D) The applicable credit varies in amount from year to year.
E) None of the choices are correct.

F) B) and C)
G) D) and E)

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Question 43

Multiple Choice

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The calculation of the value of a life estate in a trust generally does not depend upon which of the following factors?

A bypass provision in a will requires a decedent to have a taxable estate in order to use an applicable credit to reduce total estate taxes on a married couple.

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?

Adjusted taxable gifts are included when calculating the taxable estate but are not subject to double taxation because a tax credit is provided for taxes payable on adjusted taxable gifts.

Natalie transferred $500,000 of bonds to a revocable trust with directions to the trustee to pay income to her aunt for five years after which the corpus is to be distributed to Natalie's niece.At year end,the trustee paid $15,000 of income to the aunt.Which of the following is a true statement?

Proceeds of life insurance paid due to the death of the decedent are included in the decedent's gross estate if the decedent had the right to designate the beneficiary of the policy.

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

At his death,Stanley owned real estate worth $345,000 with two other individuals as equal tenants in common.Stanley contributed $50,000 to the $100,000 total cost of the property.What amount,if any,is included in Stanley's gross estate?

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?

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

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

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

Life insurance is an asset that can be used to fund a trust to support a surviving spouse and,yet,may not be included in the decedent's gross estate.

The tax on cumulative taxable gifts is reduced by the applicable credit regardless of whether any applicable credit was used in prior years.

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.

At his death,Tyrone's life insurance policy paid his estate $85,000.What amount,if any,is included in Tyrone's gross estate?

Which of the following statements is (are) true?

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?