Question 1

Which of the following is a taxable gift?

Accepted Answer

Contributions to political parties, payments made directly to educational institutions for tuition, and donations to qualified charitable organizations are generally not considered taxable gifts.

Question 2

A fiduciary tax return is filed by

Accepted Answer

A fiduciary tax return is a tax return filed by a trustee or an executor. It is also filed by an administrator or personal representative of an estate. Therefore, option E states the correct answer as it includes both (a) and (c) which are trustee and executor respectively.

Question 3

The gift tax

Accepted Answer

The answer of The gift tax
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Question 4

Which of the following gifts is not eligible for the annual exclusion?

Accepted Answer

The remainder interest in a trust is not eligible for the annual exclusion because it involves a future interest, which is not considered a present interest. The other choices are all eligible for the annual exclusion, either because they are below the annual gift tax exclusion limit or because they qualify for an exception (such as the educational gift exclusion for choice C).

Question 5

The donor of a trust is the same as

Accepted Answer

The donor of a trust is also known as the grantor, the person who creates the trust and transfers assets into it.

Question 6

What is the benefit(s)of a living trust?

Accepted Answer

A living trust helps avoid probate, keeping assets out of the probate estate, and maintains privacy for beneficiaries since the trust does not become a public record.

Question 7

Chloe gave $15,000 to her son,$20,000 to her daughter,and paid $18,000 to the University of Delaware for her niece's tuition.She gave $12,000 to the United Way campaign,and $18,000 to her church.What is the amount of Chloe's taxable gifts?

Accepted Answer

The annual exclusion for gifts is $15,000 per donee. Chloe gave her son $15,000, her daughter $20,000, and her niece $18,000. The total amount of her taxable gifts is $7,000 ($20,000 - $15,000 + $18,000 - $15,000).

Question 8

Refer to the information in the preceding problem.What are Charles and Marla's taxable gifts if they elect gift splitting?

Accepted Answer

Gift splitting allows a married couple to treat a gift made by one spouse to a third party as if it were made one-half by each spouse. This reduces the amount of the gift that is subject to gift tax. In this case, Charles and Marla's taxable gifts would be $68,000 if they elect gift splitting.

Question 9

An income interest in a trust

Accepted Answer

An income interest in a trust must be irrevocable to be eligible for the annual exclusion. This means the donor cannot change the beneficiary or terms of the trust once it is established if they want the gift to qualify for the annual exclusion from gift taxes.

Question 10

The following transfer(s)is excluded from gift taxes:

Accepted Answer

Option A is excluded from gift taxes because payments made to medical and educational institutions as a gift on behalf of someone else are excluded from gift taxes.
Option B is excluded from gift taxes because property transfers made as part of a divorce settlement are excluded from gift taxes.
Option C exceeds the annual exclusion amount of $15,000 and would be subject to gift taxes.

Question 11

The amount of the kiddie tax is the sum of

Accepted Answer

The answer of The amount of the kiddie tax is...

Question 12

Silvia has three grandchildren.What is the maximum amount that she can contribute this year to a Section 529 education plan without incurring a gift tax?

Accepted Answer

The answer of Silvia has three grandchildren.What is the maximum...

Question 13

Cheryl bought some stock for $110,000.Two years later,she gave the stock to her brother,Harold,when its value was $100,000.Three years later,Harold sold the stock for $105,000.What is the value of the gift to Harold,and his gain or loss on the sale,respectively?

Accepted Answer

The answer of Cheryl bought some stock for $110,000.Two years...

Question 14

When will an insurance policy on the decedent's life be included in a decedent's gross estate?

Accepted Answer

The decedent could change the beneficiary and the decedent gave the policy to his daughter two years ago.

Question 15

A trust that features a demand provision by a beneficiary equal to the annual exclusion is

Accepted Answer

A Crummey trust includes a provision that allows beneficiaries to withdraw contributions equal to the annual gift tax exclusion for a limited period of time, thus qualifying these gifts for the exclusion and removing them from the grantor's estate.

Question 16

When Shipley died,he owned $100,000 in bonds that he left to his church,a $400,000 house held in joint tenancy with right of survivorship with his brother,and a collection of antique automobiles valued at $1,300,000 that he left to his son.What are Shipley's probate estate and his gross estate,respectively?

Accepted Answer

Shipley's probate estate includes assets that would be distributed under his will or intestacy laws, which are the bonds and the antique automobiles, totaling $1,400,000. His gross estate includes all assets he owned at death, including the house held in joint tenancy, totaling $1,600,000.

Question 17

All of the following apply to the Coverdell education savings account except:

Accepted Answer

The Coverdell education savings account does not allow the same contribution as a Section 529 qualified tuition plan. In fact, the annual contribution limit for a Coverdell ESA is only $2,000, and it also limits contributions from higher income taxpayers. However, beneficiaries may be able to be changed, which is a feature unique to the Coverdell ESA.

Question 18

Charles gave his three grandsons $20,000 each,his friend,Joe,$15,000,and his daughter $30,000.His second wife,Marla,gave her three children $50,000 each and $50,000 to her church.What are their combined taxable gifts if they do not elect gift splitting?

Accepted Answer

The answer of Charles gave his three grandsons $20,000 each,his...

Question 19

The kiddie tax can only be imposed on

Accepted Answer

Unearned income of a child in excess of $2,000 is subject to the kiddie tax.

Question 20

The annual gift tax exclusion

Accepted Answer

The annual gift tax exclusion allows individuals to give gifts up to a certain amount each year without incurring gift tax. This exclusion is designed to remove small gifts from taxation. The amount can increase with inflation adjustments, so it is not capped at $14,000.

Quiz 12: Wealth Transfer Taxes