Deck 18: The Federal Gift and Estate Taxes

Question 1

Becky made taxable gifts in 1974, 2010, and 2011. In computing the gift tax on the 2011 gift, she must consider all of the prior taxable gifts.

Answer 1

True

Question 2

Kim, a resident and citizen of Korea, dies during an operation at the Mayo Clinic in Rochester (MN). Because Kim died in the U.S., he will be subject to the Federal estate tax.

Answer 2

False

Question 3

An estate tax is a tax on the right of an heir to receive property on the death of the owner.

Answer 3

False

Question 4

For Federal estate tax purposes, the gross estate may include property the decedent does not own.

Question 5

Under the alternate valuation date election, each asset in the gross estate is valued at the lesser of the date of death value or six months thereafter.

Question 6

For both the Federal gift and estate tax, a deduction is allowed for certain transfers to charity.

Question 7

A lifetime transfer that is supported by full and adequate consideration is not a gift.

Question 8

At one point, the tax rates applicable to transfers by gift were lower than those applying to transfers by death.

Question 9

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

Question 10

One of the reasons the estate tax was enacted was to prevent the avoidance of the gift tax by the making of "deathbed gifts."

Question 11

For Federal estate tax purposes, the gross estate does not include property that will pass to a surviving spouse.

Question 12

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

Question 13

Daniel's will provides that all of his property passes to a trust, life estate to his wife, remainder to charity. If Daniel's executor does not make a QTIP election, the use of the alternate valuation date is possible.

Question 14

Sometimes also known as transaction taxes, Federal gift and estate taxes are excise taxes.

Question 15

If the value of the gross estate is lower on the alternate valuation date than on the date of death, then the alternate valuation must be used.

Question 16

José, a citizen and resident of Panama, makes a gift of ExxonMobil stock to his children. Because ExxonMobil is a U.S. corporation, José will be subject to the U.S. Federal gift tax.

Question 17

For Federal estate and gift tax purposes, the exclusion amount is the same thing as the exemption equivalent.

Question 18

Paul, a U.S. citizen, will avoid the Federal estate tax if he becomes a Canadian resident and owns no property located in the U.S. at the time of his death.

Question 19

In some cases, the Federal gift tax can be imposed on someone other than the donor.

Question 20

A few states impose both an estate tax and an inheritance tax.

Question 21

A transfer in trust in which the trustee has the power to accumulate income is not a gift of a future interest if the trustee never exercises the power.

Question 22

For gift tax purposes, a property settlement in consideration of marriage (i.e., prenuptial agreement) is not treated the same as a property settlement incident to a divorce.

Question 23

Sam purchases a U.S. savings bond which he registers as follows: "Sam, payable to Don upon Sam's death." A gift occurs when Sam dies.

Question 24

In community property states, all property acquired after marriage by either spouse is community property.

Question 25

Mitch pays the surgeon and the hospital for his aunt's gall bladder operation. The transfer is not subject to the gift tax.

Question 26

Pauline sells antique furniture to her daughter, Nicole, for $10,000. If the furniture is really worth $100,000, Pauline has made a gift to Nicole of $100,000.

Question 27

Transfers to political organizations are not exempt from the application of the Federal gift tax.

Question 28

The election of the alternate valuation date does not include any income earned by the property after the date the deceased owner died.

Question 29

Although qualified tuition plans under § 529 are treated favorably for gift tax purposes, such plans are subject to estate tax consequences upon the grantor's death.

Question 30

The death of a tenant in common will defeat his or her interest in the property.

Question 31

To make the election to split gifts under § 2513, spouses must file a Form 709 (Federal gift tax return).

Question 32

A timely issued disclaimer by an heir transfers the property to someone else without a Federal gift tax result.

Question 33

In 2011, grandparents contribute jointly owned funds to a § 529 qualified tuition plan on behalf of their granddaughter. The maximum annual exclusion allowed to them is $130,000 ($26,000 ´ 5 years).

Question 34

A husband and wife make a gift of their vacation home to their adult children. If the property is owned jointly by them, the gift-splitting election need not be made.

Question 35

A father wants to give a parcel of land to his two children. If he wants the survivor to have sole ownership, he should list ownership of the property as joint tenants.

Question 36

The election of the alternate valuation date cannot affect the amount of a charitable deduction allowed to an estate for a bequest to a qualified charity.

Question 37

If interest is provided for in loans between related parties, there is no imputed interest, as a gift loan does not result.

Question 38

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

Question 39

Sandy pays a local college for her non-dependent boyfriend's tuition. The payment is not subject to the Federal gift tax.

Question 40

Under his grandfather's will, Tad is entitled to receive shares of Kroger Corporation. For Federal tax purposes, Tad is allowed to disclaim some of these shares and accept the others.

Question 41

For estate tax purposes, a surviving spouse's share of the community property is handled in the same manner as a surviving spouse's dower interest.

Question 42

The use of the election to split gifts under § 2513 may be necessary for spouses who live in community property states.

Question 43

At the time of his death, Gene held a Roth IRA account with his wife as the designated beneficiary. The IRA is included in Gene's gross estate.

Question 44

Cary and Bo are husband and wife. Using their community funds, they create a trust, life estate to Bo, remainder to their children. Four years later, Bo predeceases Cary. Nothing as to this trust is included in Bo's gross estate.

Question 45

In most cases, the gross estate of a decedent is larger than the probate estate.

Question 46

A Federal gift tax return may have to be filed even if no gift tax is payable.

Question 47

At the time of her death, Rita held a promissory note from a loan she had made to her son. Even if Rita's will forgives the loan, the note is included in her gross estate.

Question 48

In 2009, Katherine made some taxable gifts upon which she paid a Federal gift tax of $96,000. If Katherine dies in 2011, the $96,000 is included in her gross estate under the "gross up" rule.

Question 49

Under certain circumstances, the gift-splitting election can be made even though the electing spouses are no longer married to each other.

Question 50

Death does not defeat a deceased spouse's interest in a tenancy by the entirety.

Question 51

In 2010 and with $100,000, Ronald establishes a joint savings account with his cousin, Allison. In 2011, Allison withdraws the $100,000 and disappears. Ronald made a gift to Allison in 2011.

Question 52

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.

Question 53

If a donor has a fiscal year of July 1-June 30 for income tax purposes, this changes the normal filing date for Form 709.

Question 54

A surviving spouse's share of the community property is not included in the deceased spouse's gross estate.

Question 55

Two brothers, Sam and Bob, acquire real estate as equal tenants in common. Of the purchase price of $200,000, Sam furnished $80,000 while Bob provided the balance. If Sam dies first ten years later when the real estate is worth $600,000, his estate includes $240,000 as to the property.

Question 56

In 2000, Irv creates a revocable trust, income payable to his children for life, remainder to his grandchildren. In 2007, Irv relinquishes the power to revoke the trust. If Irv dies in 2011, the trust is not included in his gross estate.

Question 57

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 Harry dies first, all of the real estate will be included in his gross estate.

Question 58

Iris dies intestate (i.e., without a will). All of her property passes to her heirs in accordance with the order of distribution prescribed under Federal law.

Question 59

Interest on state and local bonds is subject to neither the Federal income tax nor the Federal estate tax.

Question 60

Using his separate funds, Wilbur purchases an annuity which pays him a specified amount until death. Upon Wilbur's prior death, a reduced amount is to be paid to Marcia for her life. Marcia predeceases Wilbur. Nothing concerning the annuity contract is included in Marcia's gross estate.

Question 61

Under the terms of a trust created by Billie, Jody (Billie's brother) has the right to determine how its income is to be divided among Billie's children. Jody holds a general power of appointment.

Question 62

Sally's will passes real estate to Otto (her surviving spouse). The real estate is worth $800,000 but is subject to a mortgage of $200,000. The transfer provides Sally's estate with a marital deduction of $600,000.

Question 63

In arriving at the taxable estate, expenses incurred in administering community property are deductible only in proportion to the deceased spouse's interest in the community.

Question 64

At the time of her death, Abigail held a general power of appointment over a trust created by her grandmother in 1990. Since Abigail never exercised the general power, none of the trust is included in her gross estate.

Question 65

At the time of his death in 2011, Leroy owed Federal income taxes on income earned in 2009. Leroy's estate cannot claim an estate tax deduction for the income tax it pays.

Question 66

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 value of the real estate will be included in her gross estate.

Question 67

Manfredo makes a donation of $50,000 to the church where he was baptized in Mexico City. The gift does qualify as a charitable contribution for Federal income tax purposes.

Question 68

Ray purchases U.S. savings bonds which he lists as "Ray and Donna" as co-owners. Donna is Ray's daughter. Donna predeceases Ray. No gift or estate tax consequences result from this situation.

Question 69

Some of the charitable organizations that qualify for estate tax purposes do not qualify for income tax purposes.

Question 70

Reba purchases U.S. savings bonds which she lists in the name of Rod, Reba's son. The purchase of the bonds does not constitute a gift.

Question 71

At the time of his death, Hal owned 10 cemetery lots worth $40,000 ($4,000 each) for use by himself and his family. These lots are included in Hal's gross estate and a deduction of $4,000 is allowed the estate.

Question 72

At the time of her death in 2011, Emma still owed $36,000 on her church pledge for the year. Even if church pledges are not an enforceable obligation in the state where Emma resided, her estate can claim a deduction for the $36,000 it later pays.

Question 73

As a result of an auto accident from which she later died, Irene totaled a Bentley worth $95,000. If the insurance company covers $60,000 of the loss, Irene's estate can claim a deduction of $35,000 in arriving at the taxable estate.

Question 74

The purpose of the marital deduction is to place married decedents in common law states on par with those in community property jurisdictions.

Question 75

At the time of his prior death, Raul owned a residence with his wife, Manuela, as tenants by the entirety. The residence was purchased by Manuela ten years ago at a cost of $300,000 and has a fair market value of $1.4 million. Raul's estate will be allowed no marital deduction as to the property.

Question 76

Georgia owns an insurance policy on the life of Jake, with Scarlet as the designated beneficiary. Upon Scarlet's prior death, no transfer tax consequences result.

Question 77

Frank owns an insurance policy on the life of Cynthia, with Leon as the designated beneficiary. Upon Cynthia's prior death, Frank is treated as making a gift of the insurance proceeds to Leon.

Question 78

Rachel owns an insurance policy on the life of Albert with Belle as the designated beneficiary. Upon Rachel's prior death, nothing regarding this policy is included in her gross estate.

Question 79

In his will, Hernando provides for $50,000 to go to the Madrid, Spain, school system. Even though it is a foreign charity, the bequest will qualify as a charitable deduction for estate tax purposes.

Question 80

Lyle and Beatrice are brother and sister. Using his funds, Lyle purchases land, listing title as: "Lyle and Beatrice, joint tenants with right of survivorship." If Lyle dies first, all of the land is included in his gross estate.