Question 1

Manfredo makes a donation of $50,000 to the church where he was baptized in Mexico City. The gift does not qualify as a charitable contribution for Federal income tax purposes.

Accepted Answer

The fact that the gift does not qualify as a charitable contribution for Federal income tax purposes indicates that it cannot be deducted from Manfredo's taxable income.

Question 2

By his will, all of Rusty's property passes outright to his wife, Patsy. As Patsy was not given a general power of appointment or Rusty's executor did not make a QTIP election, Rusty's estate is not allowed a marital deduction.

Accepted Answer

A marital deduction is allowed for property passing outright to a spouse, regardless of a QTIP election or general power of appointment.

Question 3

Lila is the owner and beneficiary of a policy on the life of her husband, Austin. Upon Austin's death, the insurance proceeds paid to Lila do not qualify for the marital deduction.

Accepted Answer

The insurance proceeds paid to Lila do not qualify for the marital deduction because they are not considered part of Austin's estate and do not pass through his estate to his spouse. Therefore, they are subject to estate tax in Lila's estate when she receives them as the beneficiary.

Question 4

At the time of his death in 2016, Leroy owed Federal income taxes on income earned in 2014. Leroy's estate can claim an estate tax deduction for the income tax it pays.

Accepted Answer

This is true. The estate can claim an estate tax deduction for the income tax it pays on behalf of the decedent's income. This is known as a "claim against the estate" deduction.

Question 5

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.

Accepted Answer

The marital deduction is equal to the value of the property passing to the surviving spouse, which in this case is $800,000 minus the mortgage of $200,000, or $600,000.

Question 6

In the case of a transfer by gift, a QTIP election causes the property to be subject to the estate tax upon the death of the donee spouse.

Accepted Answer

The answer of In the case of a transfer by...

Question 7

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 casualty loss of $35,000 in arriving at the taxable estate.

Accepted Answer

The answer of As a result of an auto accident...

Question 8

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.

Accepted Answer

The answer of Reba purchases U.S. savings bonds which she...

Question 9

To avoid the terminable interest limitation on the marital deduction, the surviving spouse must be granted a general power of appointment over the trust property, or a QTIP election must be made.

Accepted Answer

To avoid the terminable interest limitation on the marital deduction, the surviving spouse must be granted a general power of appointment over the trust property or a QTIP election must be made.

Question 10

For the estate tax, transfers to a surviving spouse who is not a U.S. citizen will qualify for the marital deduction if the transfer is to a qualified domestic trust.

Accepted Answer

This statement is true. Transfers to a surviving spouse who is not a U.S. citizen will qualify for the marital deduction if the transfer is made to a qualified domestic trust. Without a QDOT, the non-citizen spouse would not be eligible for the marital deduction because there is a risk that the assets would be transferred out of the U.S. and escape taxation.

Question 11

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 not included in Hal's gross estate and no deduction is allowed the estate.

Accepted Answer

Cemetery lots owned by an individual for personal use or family use are not included in the gross estate and no deduction is allowed for them.

Question 12

In his will, Hernando provides for $50,000 to go to the Madrid, Spain, school system. Because it is a foreign charity, the bequest will not qualify as a charitable deduction for estate tax purposes.

Accepted Answer

In the United States, bequests to foreign charities can qualify for the estate tax charitable deduction, provided the foreign organization meets certain requirements similar to those for domestic charities.

Question 13

All of the charitable organizations that qualify for estate tax purposes also qualify for income tax purposes.

Accepted Answer

The answer of All of the charitable organizations that qualify...

Question 14

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

Accepted Answer

As long as there is no transfer of the policy ownership or benefits to Scarlet's estate or any other person, there will be no transfer tax consequences upon Scarlet's death.

Question 15

At the time of his death, Raul owned a residence with his wife, Manuela, as joint tenants. 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.

Accepted Answer

The answer of At the time of his death, Raul...

Question 16

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

Accepted Answer

The marital deduction allows for the transfer of an unlimited amount of assets to a surviving spouse without incurring estate taxes, aligning the treatment of estates in common law states with those in community property states.

Question 17

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

Accepted Answer

The ownership of an insurance policy on someone else's life (in this case, Albert's life) by Rachel means that upon Rachel's death, the value of the policy is included in her gross estate, not the fact of who the beneficiary is (Belle in this case).

Question 18

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

Accepted Answer

The answer of At the time of her death, Emma...

Question 19

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.

Accepted Answer

This statement is true according to the Internal Revenue Code section 2053(a)(3). It states that "in arriving at the taxable estate, there shall be deducted amounts for expenses of administering property not required to be included in the gross estate and for family allowances, but no deduction shall be allowed in respect of any item (other than a family allowance) which is not allowable as a deduction under this chapter in computing the net estate, unless the executor establishes that such deduction is proper and was not, under all the circumstances, unreasonable." Therefore, community property expenses can only be deducted based on the deceased spouse's interest in the community property.

Question 20

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

Accepted Answer

This is true because when Frank receives the insurance proceeds, he is considered to have made a gift to Leon, who is the designated beneficiary, and may be subject to gift tax or estate tax implications.

Quiz 18: The Federal Gift and Estate Taxes