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Exam 14: Transfer Taxes and Wealth Planning

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Question 61

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Madison was married at the time of her death and her gross estate consisted of $22 million in stock and bonds. Madison left all of her property to her spouse. What is the result?

A) Madison's taxable estate will be zero.
B) Madison's surviving spouse will have an income tax basis in the inherited property of zero.
C) Madison's adjusted gross estate will be zero.
D) Madison's estate will have a tentative estate tax of zero.
E) None of the choices are correct.

F) B) and D)
G) B) and C)

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Question 62

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Grace transferred $800,000 into trust with the income to be paid annually to her spouse, Isaiah, for life and the remainder to Taylor. Calculate the amount of the taxable gifts from the transfers.

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$785,000
The life estate is not eligible...

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Question 63

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At her death Emily owned real estate worth $2.5 million and other property worth $10 million. Property taxes of $200,000 were accrued on the real estate at the time of Emily's death. Which of the following is a True statement with respect to these items without considering any other owned property?

Eric has $5 million of property that he wants to leave to his four children. He is considering making a current gift of the property (rather than leaving the property to pass through his will). Eric has made many prior taxable gifts and additional taxable transfers will be subject to the highest transfer tax rate. Determine how much estate tax Eric will save if he gifts the property now and survives at least three years, during which time the property appreciates to $5.5 million? Ignore the time value of money in your calculation.

This year, Brent by himself purchased season baseball tickets in the exclusive sky club. The price of the tickets was $60,000, and Brent divided the tickets equally with his two brothers (Brent gave one-third of the tickets to each brother) . Has Brent made a taxable gift and, if so, in what amount?

This year Nathan transferred $7 million to an irrevocable trust established for the benefit of his nephew. The trustee is directed to accumulate income for the next 5 years before distributing the trust corpus to Nathan's nephew. In past years Nathan has made taxable gifts of $6 million and used an applicable credit on an exemption equivalent of $5 million. What amount of gift tax, if any, must Nathan remit?

Ricardo transferred $1,000,000 of cash to State University for a new sports complex. Calculate the amount of the taxable gift.

Matthew and Addison are married and live in Michigan, a common-law state. For the holidays Addison gave cash gifts of $40,000 to each of her two sons, and Matthew gave $40,000 to his daughter. What is the amount of Addison's taxable gifts if Matthew and Addison opt to gift split?

Caleb transferred $115,000 to an irrevocable trust for Avery. The trustee has the discretion to distribute income or corpus for Avery's benefit but is required to distribute all assets to Avery (or his estate) not later than Avery's 21ˢᵗ birthday. What is the amount, if any, of the taxable gift?

A trust is a legal entity that can only exist for a year.

Only complete gifts are subject to the Federal gift tax.

Life insurance is an asset that can be used to fund a trust to support a surviving spouse and, yet, may not be included in the decedent's gross estate.

The calculation of the value of a life estate in a trust generally does not depend upon which of the following factors?

A transfer of cash to a bank account held in joint tenancy with the right of survivorship is not a completed gift.

The gross estate may contain property transfers that are not included in the probate estate.

Property inherited from a decedent has an adjusted basis equal to the value of the property included in the decedent's estate.

This year Maria transferred $600,000 to an irrevocable trust that pays equal shares of income annually to four cousins (or their estates) for the next eight years. At that time, the trust is terminated and the corpus of the trust reverts to Maria. Determine the amount, if any, of the current gifts and the taxable gifts if the relevant interest rate is 6 percent and Maria is married and elects to gift-split with her spouse?

The probate estate will include the total value of all real property owned by the decedent at the time of death regardless of whether the decedent co-owned the property as tenants in common or as joint tenants with the right of survivorship.

The marital and charitable deductions are common to both the estate tax and the gift tax formulas.

A future interest is a right to receive income or property in the future.