Question 1

Peggy gives $200,000 to her grandson. This is an example of a direct skip for purposes of the GSTT (generation-skipping transfer tax).

Accepted Answer

A direct skip is when a donor transfers property directly to a skip person (generally a grandchild or more remote descendant) in a way that skips over the donor's child (the grandchild's parent) as the first generation. Direct skips are subject to the generation-skipping transfer tax (GSTT). In the scenario given, Peggy is making a direct skip to her grandson, making it subject to GSTT.

Question 2

At the time of her death on September 10,2008,Kara was involved in the following transactions.

As to these transactions,Kara's gross estate includes:

Accepted Answer

$3,000,000.The Mauve stock but not the dividend are included (record date of dividend was after Kara's death).Because of the QTIP election,the trust is included in a donee spouse's estate.Post-1976 taxable gifts are added to the taxable estate in arriving at the tax base.

Question 3

In 1997,Katelyn inherited considerable property when her father died. When Katelyn dies in 2008,her estate may be able to use § 2013 (credit for tax on prior transfers)as to some of the estate taxes paid by her father's estate.

Accepted Answer

Section 2013 is not available if 10 years have elapsed.

Question 4

Which,if any,of the following statements is incorrect?

Accepted Answer

Marital and charitable deductions are allowed for both the gift and estate taxes (choices b.and d.).The unified credits for 2008 are $345,800 (gift tax)and $780,800 (estate tax)-choice e.

Question 5

Which,if any,of the following statements correctly reflects the rules applicable to the alternate valuation date ?

Accepted Answer

The election is made by the executor of the estate (choice a.).No election can be made unless a Form 706 is due (choice b.),and the effect is to reduce both the gross estate and the estate tax liability (choice c.).The election (or nonelection)has a direct impact on income tax basis (choice d.).

Question 6

At the time of Dylan's death,he was a resident of Newark.He owns land located in Australia,which is subject to that country's death tax.This same land also is subject to the Federal estate tax.

Accepted Answer

Dylan may,however,be able to claim a credit against the Federal estate tax for foreign death taxes paid.

Question 7

At the time of his death,Dustin owned some common stock.

The Gray Corporation stock is sold by the executor of the estate five months after Dustin's death for $1,300,000.If the alternate valuation date is properly elected,the value of Dustin's estate as to these stocks is:

Accepted Answer

$1,300,000 (Gray Corporation stock)+ $1,400,000 (Silver Corporation stock)= $2,700,000.

Question 8

In which,if any,of the following independent situations can the alternate valuation date be elected?

Accepted Answer

The answer of In which,if any,of the following independent situations...

Question 9

Which,if any,of the following statements does not reflect the current structure of the Federal transfer tax system?

Accepted Answer

Under § 2035,certain gifts made within three years of death must be included in the donor-decedent's gross estate (choice b.).The gift tax is cumulative as to all prior taxable gifts (choice c.).Pre-1977 taxable gifts,although relevant for gift tax purposes,are not included in arriving at the tax base for estate tax purposes (choice d.).The unified transfer tax credits may be different but the tax rates are the same for both the gift and estate taxes (choice e.).

Question 10

Like the Federal estate tax,the generation skipping transfer tax (GSTT)is being phased out.

Accepted Answer

Both are being phased out in like manner.

Question 11

Which,if any,of the following items is subject to indexation (adjusted to reflect inflation)?

Accepted Answer

No monetary amount is specified for making the § 2032 election (choice a.).True,the § 2032 election cannot be made unless a Form 706 must be filed,but this depends on the filing requirements and are not subject to indexation.Although the annual exclusion (choice c.)is not revised every year,it is adjusted whenever the inflation factor reaches a specified level.The changes to the tax credits (choice b.)and tax rates (choice d.)are provided by the law and are not dictated by inflation.

Question 12

At the time of his death,Norton was involved in the following transactions.

What amount is included in Norton's gross estate?

Accepted Answer

$600,000 + $400,000 + $200,000 + $500,000 = $1,700,000.All of the joint tenancy is included in the gross estate as Norton contributed all of the purchase price.A tenancy by the entirety is a joint tenancy between husband and wife.Under a special rule,each spouse is deemed to be an equal contributor to the cost of the property.Under § 2033,Norton's share of the tenancy is included in his gross estate.Municipal bonds are included in the gross estate.

Question 13

In which,if any,of the following independent situations has Ted made a gift?

Accepted Answer

Choice a.is a complete transfer-there is no retention of a right to revoke the trust.Although Ted has kept for himself a life estate in the trust,he has made a gift of a remainder interest to his children.Choice b.is not a gift but is a testamentary transfer.Payment was made directly to the provider of another's medical expenses and is,therefore,not a gift (choice c.).Section 2516 treats property settlements incident to divorce as being for full and adequate consideration (choice d.).

Question 14

In which,if any,of the following independent situations has Geraldine made a gift?

Accepted Answer

Providing a son with a college education (choice a.)is satisfying the obligation of support.Providing support for a grandfather,even if required or necessary,stops short of a BMW automobile (choice b.).Paying directly to an educational organization for someone's tuition is not a gift,and dependency status is immaterial (choice c.).Political contributions are not treated as gifts (choice d.).

Question 15

Which,if any,of the following is a correct statement regarding the filing of a gift tax return (Form 709)?

Accepted Answer

Form 709 is not filed in the same year that the gift was made,but on April 15 of the following year (choice a.).The due date for the Form 709 is the same as that for Form 1040 only if the donor uses the calendar year for income tax purposes (choice b.).Even if less than the annual exclusion,a Form 709 must be filed if a future interest is involved (choice c.).Gifts between spouses are not reported on Form 709 (choice d.).

Question 16

Eric dies at age 96 and is survived by his third wife,Monique (age 22),and a granddaughter,Paige (age 50). Eric's will divides his $6 million estate between these two survivors.Both of these transfers are subject to the generation skipping transfer tax (GSTT).

Accepted Answer

Only the portion passing to Paige is subject to the GSTT. Monique,28 years younger than Paige,is treated as being in the same generation as her husband Eric.

Question 17

Before his nephew (Dean)leaves for college,Will loans him $400,000.Dean signs a note promising to repay the loan in five years.No interest element is provided.Which,if any,of the following is not a tax consequence of this arrangement?

Accepted Answer

The answer of Before his nephew (Dean)leaves for college,Will loans...

Question 18

The U.S.has death tax conventions (i.e.,treaties)with most of the countries of the world.

Accepted Answer

Compared with income tax treaties,the word "few" (not "most")better describes the situation.See Global Tax Issues.

Question 19

Which of the following statements relating to the Federal gift tax is incorrect?

Accepted Answer

The deemed paid credit can be more or less than the tax actually paid (choice a.).The whole purpose of the disclaimer provision is to avoid a layer of transfer taxes (choice b.).

Question 20

Bernice dies and leaves property to her sister Yolanda.One year later,Yolanda dies.Under § 2013 (credit for tax on prior transfers),Yolanda's estate can claim a full credit for any Federal estate taxes paid by Bernice's estate as to amounts passing to Yolanda.

Accepted Answer

The full credit is allowed if the transferee's death occurs within two years of transferor's death.

Quiz 17: The Federal Gift and Estate Taxes