Question 1

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

Accepted Answer

Qualified tuition plans under § 529 are generally not included in the grantor's gross estate upon death, as contributions are considered completed gifts for federal tax purposes, removing them from the estate.

Question 2

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

Accepted Answer

In community property states, the surviving spouse's share of the community property is considered to already belong to them and thus is not included in the deceased spouse's gross estate for estate tax purposes.

Question 3

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 the Internal Revenue Code.

Accepted Answer

The distribution of a decedent's estate in the case of intestacy (dying without a will) is governed by state probate laws, not the Internal Revenue Code. The Internal Revenue Code deals with tax matters.

Question 4

In year 1 and with $100,000, Ronald establishes a joint savings account with his cousin, Allison. In year 2, Allison withdraws the $100,000 and leaves the country. Ronald made a gift to Allison in year 2.

Accepted Answer

Ronald made a gift to Allison in year 2, which is considered a transfer of property.

Question 5

Lyle and Kelly are brother and sister. Using his funds, Lyle purchases land, listing title as: "Lyle and Kelly, joint tenants with right of survivorship." If Kelly dies first, none of the land is included in her gross estate.

Accepted Answer

Since the land was held as joint tenants with right of survivorship, upon Kelly's death, Lyle automatically becomes the sole owner of the property, and thus, none of the land is included in Kelly's gross estate.

Question 6

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

Accepted Answer

The gift-splitting election can be made for gifts given during a year when the spouses were married, even if they are no longer married by the time the gift tax return is filed, as long as they were married at the time the gift was made and both are still living at the time the election is made.

Question 7

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

Accepted Answer

A timely issued disclaimer by an heir allows the property to pass to the next beneficiary in line without being considered a gift by the disclaimant, thus avoiding Federal gift tax implications.

Question 8

Using his separate funds, Wilbur purchases an annuity that pays him a specified amount until death. Upon Wilbur's 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.

Accepted Answer

Since Marcia predeceased Wilbur and had no ownership interest in the annuity, the annuity does not form part of her gross estate. The annuity was purchased by Wilbur with his separate funds and the benefits were contingent on his survival; thus, Marcia's estate does not include any part of the annuity.

Question 9

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

Accepted Answer

To split gifts between spouses, they must both agree to do so and indicate this by both filing a Form 709, which is the United States Gift (and Generation-Skipping Transfer) Tax Return. This allows the gifts to be treated as though they were made one-half by each spouse, effectively doubling the annual exclusion amount available to them.

Question 10

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

Accepted Answer

The answer of Harry and Brenda are husband and wife....

Question 11

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

Accepted Answer

The estate can claim a deduction for the federal income tax owed by the decedent on income earned prior to their death, as it is considered an obligation of the estate.

Question 12

In 2019, grandparents contribute jointly owned funds to a § 529 qualified tuition plan on behalf of their granddaughter.
The maximum annual exclusion allowed to them is $150,000 ($30,000 × 5 years).

Accepted Answer

In 2019, grandparents can contribute up to $150,000 to a § 529 plan for their granddaughter by taking advantage of gift splitting and the five-year election, which allows them to treat the gift as if it were spread over five years, thereby maximizing the annual gift tax exclusion without incurring a gift tax.

Question 13

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

Accepted Answer

Upon Scarlet's death, the life insurance proceeds will pass to her estate, and no federal transfer tax consequences will result.

Question 14

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 15

Ray purchases U.S. savings bonds that 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.

Accepted Answer

When a co-owner of a U.S. savings bond predeceases the other, the surviving co-owner becomes the sole owner without any gift or estate tax consequences.

Question 16

A tenancy by the entirety is restricted in most states to having more than two joint owners.

Accepted Answer

A tenancy by the entirety is a form of joint property ownership that is typically reserved exclusively for married couples, meaning it involves only two owners.

Question 17

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.

Accepted Answer

The record date determines who is entitled to receive the dividend, and if the decedent was the holder of record on that date, the dividend is included in the gross estate.

Question 18

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

Accepted Answer

Accrued interest on state and local bonds is considered part of the decedent's gross estate and is subject to Federal estate tax.

Question 19

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

Accepted Answer

Gift-splitting is not necessary for jointly owned property because each spouse is considered to have given half of the gift, so the election is not required.

Question 20

Harry and Brenda are husband and wife. Using her funds, Brenda purchases real estate that she lists as: "Harry and Brenda, joint tenants with right of survivorship." If Brenda dies first, all of the value of the real estate is included in her gross estate.

Accepted Answer

Since the property is held as joint tenants with right of survivorship, upon Brenda's death, Harry would automatically inherit her share of the property, and it would not be included in her gross estate for estate tax purposes.

Quiz 27: The Federal Gift and Estate Taxes