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Exam 27: The Federal Gift and Estate Taxes

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Question 21

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Which,if any,of the following is not a characteristic of the Federal gift tax?

A) A charitable deduction is available.
B) The alternate valuation date of § 2032 can be elected.
C) The generation-skipping transfer tax may also apply.
D) A disclaimer procedure may avoid the tax.
E) A marital deduction is available.

F) A) and D)
G) A) and C)

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Question 22

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

A) $5,000,000 $5,100,000 $400,000 $390,000
B) $4,900,000 $4,800,000 $400,000 $380,000
C) $5,100,000 $5,000,000 $390,000 $400,000
D) $5,200,000 $5,300,000 $500,000 $490,000
E) None of the above

F) A) and E)
G) A) and D)

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Question 23

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For Federal estate tax purposes,the gross estate does not include property that will pass to a surviving spouse.

In 1980,Marie and Hal (mother and son) purchased land for $600,000 as joint tenants with right of survivorship.Of the $600,000 purchase price,Marie provided $400,000 and Hal $200,000 (of which $100,000 had been received as a gift from Marie) .In 2009,Hal dies first when the land is worth $3,000,000.As to the land,Hal's gross estate must include:

The IRS does not consider property settlements in consideration of marriage as being transfers for valuable consideration.Consequently,such prenuptial settlements are subject to the Federal gift tax.Why,then,are property settlements incident to divorce exempt from the gift tax?

At the time of his death in 2009,Leroy owed Federal income taxes on income earned in 2007.Leroy's estate cannot claim an estate tax deduction for the income tax it pays.

At the time of her death in 2009,Jennifer owns property worth $4,500,000.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 Jennifer's taxable estate?

For Federal estate and gift tax purposes,the exemption equivalent is the same thing as the bypass amount.

Distributions from retirement plans and proceeds from life insurance plans usually are not subject to probate.

Two brothers,Sam and Bob,acquire real estate as equal tenants in common.Of the purchase price of $200,000,Sam furnished $80,000 while Bob provided the balance.If Sam dies first ten years later when the real estate is worth $600,000,his estate includes $240,000 as to the property.

At the time of his death,Hal owned 10 cemetery lots worth $40,000 ($4,000 each)for use by himself and his family.These lots are included in Hal's gross estate and a deduction of $4,000 is allowed the estate.

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.

One of the reasons the estate tax was enacted was to prevent the avoidance of the gift tax by the making of "deathbed gifts."

In 2000,Irv creates a revocable trust,income payable to his children for life,remainder to his grandchildren.In 2008,Irv relinquishes the power to revoke the trust.If Irv dies in 2009,the trust is not included in his gross estate.

Tom and Jean are husband and wife and live in California.In 1991,they use $400,000 of community funds to purchase an annuity from an insurance company.Under the terms of the contract,Tom is to receive $40,000 per year for life once he reaches age 65.If Jean outlives Tom,she is to receive $30,000 per year for life.Tom dies first in 2009 (and before reaching age 65) .At this time,the value of Jean's interest is $500,000.As to this contract,Tom's gross estate includes:

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

Barry made taxable gifts as follows: $400,000 in 1973,$200,000 in 1974,$600,000 in 1985,and $700,000 in 2001.In 2009,Barry dies leaving a taxable estate of $4,000,000.Barry's tax base for applying the unified tax rate schedules (for estate tax purposes) is:

Prior to his death in 2009,Cameron made the following taxable gifts. The policy of Cameron's life was given to the designated beneficiary.The gift of the stock and the land generated gift taxes of $28,750 and $64,250,respectively. As to these transfers,how much is included in Cameron's gross estate?

The Federal gift and estate taxes were restructured in 1976 into the unified transfer tax.The objective of the change was to eliminate the tax difference between transfers during life (gift tax)and at death (estate tax).Does this uniformity of treatment currently exist? In this regard,comment on the following differences between the two taxes.

The current top Federal transfer tax rate of 45% is the highest that the rate ever has been.