Question 1

At the time of his death on August 7, Michael owned the following assets.
? Green Corporation stock (cost $700,000, FMV $950,000). On July 20, Green declared a cash dividend, payable on August 17 to all shareholders as of the record date of August 8. Michael's executor receives the $64,000 dividend on the scheduled payment date.
? Note receivable (face amount $600,000) payable on demand. The note was received by Michael two years previously from his daughter Addison. Addison used the loan to start a business which currently is very successful. In his will, Michael forgives the note.
How much, as to these transactions, is included in Michael's gross estate?

Accepted Answer

The answer of At the time of his death on...

Question 2

In 2015, Noah and Kelly acquire real estate for $2,000,000, with Noah furnishing $400,000 of the purchase price and Kelly providing the balance. Title to the property is listed as: "Noah and Kelly, equal tenants in common." Noah dies first in 2019, when the real estate is worth $4,000,000.
a. Were there any tax consequences in 2015? Explain.
b. How much, as to the real estate, is included in Noah's gross estate?
c. As to parts a. and b., would it make any difference whether Noah and Kelly are brother and sister or husband and wife?

Accepted Answer

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Question 3

At the time of her death on June 6, Mary owned the following assets.
? Taupe Corporation stock (cost $400,000, FMV $800,000). On May 4, Taupe declared a cash dividend, payable on June 15, to shareholders as of the record date of June 4. Mary's executor received the $40,000 dividend on the scheduled payment date.
? City of Boise bonds (cost $800,000, FMV $780,000). Interest accrued to June 6 was $42,000.
The executor eventually collected $50,000 (included post-death accrual of $8,000) on July 20.
As to these transactions, how much is included in Mary's gross estate?

Accepted Answer

The answer of At the time of her death on...

Question 4

On the date of her death, Ava owned the following.
? An insurance policy (face amount of $500,000) on the life of Benjamin (Ava's current husband) with herself as the designated beneficiary. The policy has a cash surrender value of $50,000.
? A life estate in a trust created by Alexander (Ava's deceased prior husband). The trust (current value of $2,900,000) was worth $1,000,000 when created ten years ago. A QTIP election was made by the executor of Alexander's estate.
? Federal income tax refund of $80,000 on a prior year's tax return and paid to the executor of Ava's estate.
As to these items, how much is included in Ava's gross estate?

Accepted Answer

The answer of On the date of her death, Ava...

Question 5

Mandy and Hal (mother and son) purchased land for $600,000 as joint tenants with right of survivorship. Of the $600,000 purchase price, Mandy provided $300,000 and Hal $300,000 (of which $200,000 had been received as a gift from Mandy). Hal dies first when the land is worth $3,000,000. As to the land, Hal's gross estate must include:

Accepted Answer

Hal's gross estate must include the portion of the land that he effectively owned. Since he contributed $100,000 of his own money (after accounting for the $200,000 gift from Mandy), his ownership interest is 1/6 of the total value at the time of his death, which is $500,000 (1/6 of $3,000,000).

Question 6

Homer and Laura are husband and wife. At the time of Homer's death, they owned the following: land as tenants by the entirety worth $2,000,000 (purchased by Homer) and stock as equal tenants in common worth $3,000,000 (purchased by Laura). Homer owns an insurance policy on his life (maturity value of $1,000,000) with Laura as the designated beneficiary. Homer's will passes all his property to Laura. How much marital deduction is allowed Homer's estate?

Accepted Answer

The marital deduction is allowed for the value of property passing from the decedent to the surviving spouse. In this case, the property passing to Laura includes the land held as tenants by the entirety (which is not included in Homer's estate), the stock held as tenants in common (which is included in Homer's estate), and the insurance policy proceeds (which are also included in Homer's estate). The value of the land is $2,000,000, the value of the stock is $3,000,000, and the value of the insurance policy proceeds is $1,000,000. Therefore, the total value of the property passing to Laura is $6,000,000. The marital deduction is limited to the value of the property passing to the surviving spouse, so the marital deduction allowed Homer's estate is $3,500,000.

Question 7

Concerning the Federal estate tax deduction for asset transfers to charity:

Accepted Answer

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Question 8

Matt and Patricia are husband and wife and live in Oregon. In 2000 and using her funds, Patricia purchases a residence for $400,000, listing title to the property as "Matt and Patricia, joint tenants with right of survivorship." In 2018, Matt dies first when the residence is worth $2 million. A correct statement as to these transactions is:

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Question 9

At the time of her death, Sophia was a participant in her employer's qualified pension plan. Her accrued balance in the plan is as follows.
  
Sophia also was covered by her employer's group term life insurance program. Her policy (maturity value of $100,000) is made payable to Aiden (Sophia's husband). Aiden also is the designated beneficiary of the pension plan.
a. Regarding these assets, how much is included in Sophia's gross estate?
b. In Sophia's taxable estate?
c. How much gross income must Aiden recognize, when collecting on these items?

Accepted Answer

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

Question 10

Daniel and Mia acquired realty for $2 million, with Daniel furnishing $1.5 million of the purchase price and Mia providing the balance. Title to the property is listed as: "Daniel and Mia, joint tenants with right of survivorship." This year Mia dies first when the realty is worth $4 million. How much is included in Mia's gross estate under the following circumstances?
a. Daniel and Mia are brother and sister.
b. Daniel and Mia are husband and wife.

Accepted Answer

The answer of Daniel and Mia acquired realty for $2...

Question 11

Pursuant to Corey's will, Emma (Corey's sister) inherits his property. Emma dies in a later tax year. The estate tax attributable to the inclusion of the property in Corey's gross estate was $300,000. The estate tax attributable to the inclusion of the property in Emma's gross estate is $400,000. Emma's credit for the tax on prior transfers is:

Accepted Answer

Emma's credit for the tax on prior transfers is based on the amount of estate tax attributable to the property that she inherited from Corey. Since the property was included in Corey's gross estate, the estate tax attributable to the property would be $300,000. However, since Emma also included the property in her gross estate, the estate tax attributable to the property would be increased to $400,000. Therefore, Emma's credit for the tax on prior transfers would be the difference between the two, which is $100,000. The timing of Emma's death is not relevant to the calculation of her credit for the tax on prior transfers. The correct answer is D.

Question 12

Ben and Lynn are married and have four pre-teen grandchildren. They want to contribute to a § 529 plan on behalf of their education. For 2018, what is the maximum amount they can transfer to the plan without making a taxable gift?

Accepted Answer

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Question 13

In 2015, Thalia purchases land for $900,000 and lists title in the names of her daughters as follows: "April and Theresa, joint tenants with right of survivorship." In 2017, April and Theresa purchase an apartment building for $1 million as equal tenants in common? April furnished $400,000 and Theresa furnished $600,000 of the cost. April dies first in 2018 when the land is worth $1.5 million and the apartment building is worth $2 million. One of the results of these transactions is:

Accepted Answer

When Thalia purchased the land, she listed April and Theresa as joint tenants with right of survivorship, meaning that upon April's death, Theresa automatically becomes the sole owner of the land. Therefore, none of the land is included in April's gross estate.

However, April's portion of the apartment building, which she owned as a tenant in common with Theresa, is included in her gross estate. April contributed 40% of the purchase price, which means her share of the property is worth $800,000 at the time of her death. Additionally, April's share of the apartment building has appreciated from $400,000 to $800,000, so her gross estate includes $1.75 million ($800,000 + $900,000) as to these properties.

Question 14

At the time of her death, Amber owns property worth $5,000,000. Other information regarding her affairs is as follows.
  
All of these items (except the casualty loss) were paid by her estate, and none were deducted on Form 1041 (income tax return of the estate). What is Amber's taxable estate?

Accepted Answer

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

Question 15

Calvin's will passes $800,000 of cash to his widowed sister, Muriel. The estate tax attributable to the cash is $110,000. Muriel dies five years later, and the estate tax generated by the $800,000 is $100,000. How much of a credit for tax on prior transfers will Muriel's estate be allowed?

Accepted Answer

The answer of Calvin's will passes $800,000 of cash to...

Question 16

Murray owns an insurance policy on the life of his father, Logan. Upon Logan's death, the policy proceeds of $2,000,000 are paid to the designated beneficiary, Grace. What are the transfer tax consequences resulting from Logan's death, based on the following independent assumptions?
a. Grace is Murray's daughter.
b. Grace is Murray's wife.
c. What are the tax consequences if Murray dies first (i.e., predeceases both Grace and Logan)?

Accepted Answer

The answer of Murray owns an insurance policy on the...

Question 17

Concerning the Federal estate tax deduction for asset transfers to a surviving spouse:

Accepted Answer

The Federal estate tax deduction allows for a deduction for life insurance proceeds paid to a surviving spouse, regardless of the gender of the spouse. This is part of the unlimited marital deduction provision, which does not discriminate based on the sex of the spouses or the form of their legal marital relationship following the Supreme Court's decision in United States v. Windsor (2013) and subsequent rulings.

Question 18

In 2005, Drew creates a trust with $1,000,000 of securities. Under the terms of the trust, Paula (Drew's wife) is granted a life estate with remainder to their children. Drew makes a QTIP election as to the trust. Drew dies in 2012 when the trust is worth $1,500,000, and Paula dies in 2018 when the trust is worth $2,000,000. Which, if any, of the following is a correct statement?

Accepted Answer

When a QTIP election is made, the trust property is included in the surviving spouse's gross estate upon their death. Therefore, the entire value of the trust ($2,000,000) is included in Paula's gross estate when she dies in 2018.

Question 19

At the time of his death, Jason was a participant in Silver Corporation's qualified pension plan and group term life insurance. The balance of the survivorship feature in his pension plan is: 
The term insurance has a maturity value of $100,000. All amounts are paid to Pam, Jason's daughter. One result of these transactions is:

Accepted Answer

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

Question 20

At the time of her death, Megan was involved in the following.
? Owned an insurance policy on the life of her father with a replacement cost of $250,000 and maturity value of $800,000. The designated beneficiary of the policy is Megan's estate.
? Was an equal tenant in common with her brother in a tract of land worth $800,000. The land was inherited from their grandmother 10 years ago when it had a value of $200,000.
? Was a joint tenant with her two sisters in stock worth $1,500,000. The stock was inherited from their grandmother 10 years ago when it had a value of $500,000.
As to these transactions, Megan's gross estate must include:

Accepted Answer

Megan's gross estate includes the full value of the insurance policy ($800,000) since her estate is the beneficiary, and her share of the land ($400,000) as a tenant in common. The joint tenancy stock is not included as it passes directly to the surviving joint tenants. Total: $1,150,000.

Quiz 27: The Federal Gift and Estate Taxes

Concerning the Federal estate tax deduction for asset transfers to charity:

Ben and Lynn are married and have four pre-teen grandchildren. They want to contribute to a § 529 plan on behalf of their education. For 2018, what is the maximum amount they can transfer to the plan without making a taxable gift?

At the time of her death, Amber owns property worth $5,000,000. Other information regarding her affairs is as follows. All of these items (except the casualty loss) were paid by her estate, and none were deducted on Form 1041 (income tax return of the estate). What is Amber's taxable estate?

Calvin's will passes $800,000 of cash to his widowed sister, Muriel. The estate tax attributable to the cash is $110,000. Muriel dies five years later, and the estate tax generated by the $800,000 is $100,000. How much of a credit for tax on prior transfers will Muriel's estate be allowed?

Concerning the Federal estate tax deduction for asset transfers to a surviving spouse: