Question 1

In 1980,Spencer creates a revocable trust,income payable to his children for life,remainder to his grandchildren.Thirty-two months before he dies in 2008,Spencer relinquishes the power to revoke the trust.The trust is included in Spencer's gross estate.

Accepted Answer

Since less than three years has passed,§ 2035 does apply.

Question 2

At the time of her death,Abigail held a general power of appointment over a trust created by her grandmother in 1980.Since Abigail never exercised the general power,none of the trust is included in her gross estate.

Accepted Answer

Tax consequences will result from the lapse of a general power of appointment created after October 21,1942.

Question 3

Death does not defeat a deceased spouse's interest in community property.

Accepted Answer

In this regard,community property can be likened to a tenancy in common and contrasted with a joint tenancy.

Question 4

At the time of his death,Ethan held a traditional IRA account with his wife as the designated beneficiary.As to the IRA,none of it is included in Ethan's gross estate.

Accepted Answer

The IRA is included in the gross estate under § 2033 (property in which the decedent had an interest).

Question 5

Jason and Emma are brother and sister.Using his funds,Jason purchases land,listing title as: "Jason and Emma,joint tenants with right of survivorship." If Jason dies first,one-half is included in his gross estate as to the land.

Accepted Answer

Jason made all of the contribution to the cost of the land.

Question 6

At the time of her death,Stefanie held a promissory note from a loan she had made to her son.If Stefanie's will forgives the loan,nothing regarding the note is included in her gross estate.

Accepted Answer

The value of the note is included in Stefanie's gross estate.

Question 7

Two brothers,Sam and Bob,acquire real estate as equal tenants in common.Of the purchase price of $100,000,Sam furnished $40,000 while Bob provided the balance.If Bob dies five years later when the real estate is worth $300,000,his estate includes $180,000 as to the property.

Accepted Answer

$150,000 (50% F1F1F1S1F1F1F10 $300,000)is included.

Question 8

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.

Accepted Answer

In the case of joint ownership between married persons,a spouse's contribution does not matter.One-half of the value of the property is included in the gross estate of the first spouse to die.

Question 9

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.Wilbur predeceases Marcia.Nothing concerning the annuity contract is included in Wilbur's gross estate.

Accepted Answer

The answer of Using his separate funds,Wilbur purchases an annuity...

Question 10

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.

Accepted Answer

Jody's power of appointment is special,not general.Jody cannot appoint any of the property to himself.

Question 11

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,only one-half of the value of the real estate will be included in his gross estate.

Accepted Answer

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

Question 12

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.

Accepted Answer

The death of the beneficiary of an unmatured life insurance policy carries no tax consequences.

Question 13

A surviving spouse's dower interest is included in the deceased spouse's gross estate.

Accepted Answer

It is included in the gross estate.Often,however,the inclusion is offset by the marital deduction.

Question 14

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.

Accepted Answer

Bo was a grantor and she retained an interest in the trust.Thus,§ 2036(a)(1)applies to include one-half of the value of the trust in her gross estate.

Question 15

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.

Accepted Answer

The replacement value of an unmatured policy should be included.

Question 16

Reba purchases U.S.savings bonds which she lists in the name of Rod,Reba's son.The purchase of the bonds constitutes a gift.

Accepted Answer

The purchase is a gift.Unlike Example 53 in the text,Reba retains no interest in the bonds.Rod does not have to survive Reba to gain ownership of the bonds.

Question 17

Under Terry's will,Tyrone has the power to determine how the income from a trust is to be divided between her children.The power that Tyrone holds also permits him to appoint to himself as much of the trust income as is necessary to maintain his health.The power Tyrone holds is "special" (and not "general").

Accepted Answer

Tyrone can use the power to benefit himself,as to his "health." This is regarded as an ascertainable standard.Thus,the power is special,not general.

Question 18

In 2006 and with $100,000,Ronald establishes a joint savings account with his cousin,Allison. In 2008,Allison withdraws the $100,000 and disappears. Ronald made a gift to Allison in 2008.

Accepted Answer

In 2008, when Allison withdrew the $100,000, it was considered a gift from Ronald to Allison because she took the money without any obligation to return it, and Ronald did not take legal action to recover it.

Question 19

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.

Accepted Answer

When the owner of an insurance policy designates a beneficiary, that beneficiary becomes the recipient of the proceeds upon the insured's death. This is generally considered a gift from the owner to the beneficiary, even though the owner has passed away. In this case, Frank is the policy owner and Leon is the designated beneficiary, so upon Cynthia's death, Frank is treated as making a gift of the insurance proceeds to Leon.

Question 20

In 2004,Marcie made some taxable gifts upon which she paid a Federal gift tax of $42,000.If Marcie dies in 2008,the $42,000 is included in her gross estate under the "gross up" rule.

Accepted Answer

The "gross up" rule applies only to gift taxes paid on gifts made within the three-year period prior to death.

Quiz 17: The Federal Gift and Estate Taxes