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Exam 27: The Federal Gift and Estate Taxes

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Question 21

True/False

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A husband and wife make a gift of their jointly owned vacation home to their adult children. The gift-splitting election must be made.

A) True
B) False

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Question 22

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

A) A donor must file a Form 709 in the same year in which the gift was made.
B) The due date of a Form 709 is the same as the due date of the donor's Form 1040.
C) A Form 709 may have to be filed even though the value of the gift was less than the amount of the annual exclusion.
D) Melody gives her husband a new Mercedes convertible for his birthday. Melody must file a Form 709 to report the gift even though no gift tax results.

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

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Question 23

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Classify each statement appearing below. a. No taxable transfer occurs b. Gift tax applies c. Estate tax applies -Howard establishes a trust, life estate to his children, remainder to the grandchildren. Under its terms, the trust is revocable by Howard. Howard later relinquishes the right to revoke the trust.

An individual generally tries to reduce the present value of any Federal transfer tax liability.

Classify each of the independent statements appearing below. a. Some or all of the asset is included in the decedent's gross estate. b. None of the asset is included in the decedent's gross estate. -Land held as tenants by the entirety with surviving spouse. Decedent provided none of the funds.

At the time of Clint's death, part of his estate consists of the following. ? Roth IRA (value of $1,000,000) with Jennifer as the designated beneficiary. ? Land (worth $3,000,000) held in joint tenancy with Jennifer. Jennifer is Clint's wife and originally furnished the purchase price. ? Building (worth $3,000,000) held as equal tenants in common with Jennifer and Dana. Dana is Clint's mother, and she originally purchased the property. Under Clint's will, all of his property passes to his wife, Jennifer. How much marital deduction is Clint's estate allowed? Clint and Jennifer live in Tennessee.

Lily pays for her grandson's college expenses. Under what conditions might such payments not constitute a gift?

Classify each statement appearing below. a. No taxable transfer occurs b. Gift tax applies c. Estate tax applies -Hector transfers funds to his aunt so she can obtain a much needed hip operation. The aunt does not qualify as Hector's dependent.

At the time of his death, Tom owned some common stock. If the alternate valuation date is properly elected, the value of Tom's estate as to these stocks is:

Manuel, a citizen and resident of Argentina, makes a gift to his children of a ranch located in Colorado. Manuel will be subject to the U.S. gift tax.

Classify each statement appearing below. a. No taxable transfer occurs b. Gift tax applies c. Estate tax applies -Using his own funds, Horace establishes a savings account designating ownership as follows: "Horace and Nadine as joint tenants with right of survivorship." Horace predeceases Nadine.

Classify each statement appearing below. a. No taxable transfer occurs b. Gift tax applies c. Estate tax applies -Maggie purchased an insurance policy on Jim's life and designated Susan as the beneficiary.

Classify each statement appropriately. a. Deductible from the gross estate in arriving at the taxable estate. b. Not deductible from the gross estate in arriving at the taxable estate. -State death tax imposed on the estate.

Harry and Brenda are husband and wife. Using his funds, Harry purchases real estate which he lists as: "Harry and Brenda, tenants by the entirety with right of survivorship." If Brenda dies first, none of the real estate will be included in her gross estate.

Some states impose inheritance taxes, but the Federal tax system does not.

In determining whether a dividend issued on stock held by a decedent is included in the gross estate, the record date (rather than the declaration or payment dates) controls.

Accrued interest on state and local bonds is not subject to the Federal estate tax.

The Federal transfer taxes are applied in a manner that is:

Matt and Patricia are husband and wife and live in Oregon. In 2000 and using her funds, Patricia purchases a residence for $400,000, listing title to the property as "Matt and Patricia, joint tenants with right of survivorship." In 2018, Matt dies first when the residence is worth $2 million. A correct statement as to these transactions is:

Which, if any, of the following is a characteristic of the Federal estate tax?