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Exam 25: Transfer Taxes and Wealth Planning

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Question 61

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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.

A) True
B) False

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Question 62

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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 as independent 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.

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The taxable gift is $375,000.
Andrea has...

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Question 63

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The amount of the estate tax is directly related to the amount of taxable gifts.

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?

This year Carlos and Hailey purchased realty for $480,000 and took title as equal tenants in common. However, Hailey was able to provide only $200,000 of the purchase price and Carlos paid the remaining $280,000. Has Carlos made a taxable gift to Hailey, and if so, in what amount?

Ethan owned a vacation home at the time of his death. Which of the following is a true statement if Ethan was married to Emma and resided in a common law state at the time of his death?

The theft of property included in the gross estate is only deductible in calculating the taxable estate if the loss exceeds 10 percent of the decedent's adjusted gross estate.

Which of the following is a true statement?

For the holidays, Samuel gave a necklace worth $35,000 to Jennifer and jewelry worth $44,000 to Savannah. Samuel is married to Wendy and they live in a community property state. Has Samuel made any taxable gifts and, if so, in what amounts?

At his death Titus had a gross estate consisting of $6 million of property. Which of the following is a true statement about Titus' estate or estate tax?

The debts of the decedent at the time of death are deducted in calculating the taxable estate.

Ava transferred $1.5 million of real estate into an irrevocable trust for her son, Luis. The trustee was directed to retain income until Luis' 21^st birthday and then pay him the corpus of the trust. Ava retained the power to require the trustee to pay income to Luis at any time, and the right to the assets if Luis predeceased her. What amount of the trust, if any, will be included in Ava's estate if she died shortly after making the transfer?

Harold and Mary are married and live in a community property state. During the marriage Harold bought a parcel of real estate for $100,000 in community funds and titled the property in his name alone. Mary died on January 30^th of this year and was survived by Harold who did not remarry. The parcel of real property was worth $250,000 on January 30^th of this year but was only worth $220,000 at year end. What amount, if any, is included in Mary's gross estate?

The applicable credit is designed to:

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.

This year Nicholas earned $500,000 and used it to purchase land in joint tenancy with a right of survivorship with Nevaeh. Has Nicholas made a taxable gift to Nevaeh and, if so, in what amount?

This year Samantha gave each of her three nephews birthday gifts of $10,000 in cash. At Christmas, Samantha gave each of her three nephews Christmas gifts of an additional $6,000 in cash. What is the amount of the taxable gifts, if any, made by Samantha this year?

The estate and gift taxes share several common features. Which of the following characteristics is common to both the estate and gift taxes?

Gabriel had a taxable estate of $16 million when he died in 2018. Calculate the amount of estate tax due (if any) if Gabriel made prior taxable gifts in 2005 totaling $1 million at which time he claimed an applicable credit of $1 million and paid no tax. Gabriel was unmarried at his death. (Use Exhibit 25-1)

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.