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Exam 18: The Federal Gift and Estate Taxes

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Question 51

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In the case of a transfer by gift, a QTIP election causes the property to be subject to the estate tax upon the death of the donee spouse.

A) True
B) False

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Question 52

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In arriving at the taxable estate, expenses incurred in administering community property are deductible only in proportion to the deceased spouse's interest in the community.

A) True
B) False

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Question 53

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Eric dies at age 96 and is survived by his third wife, Monique (age 22), and a granddaughter, Paula (age 50). Eric's will divides his $11 million estate between these two survivors. Both of these transfers are subject to the generation skipping transfer tax (GSTT).

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.

Using his separate funds, Wilbur purchases an annuity which pays him a specified amount until death. Upon Wilbur's death, a reduced amount is to be paid to Marcia for her life. Marcia predeceases Wilbur. Nothing concerning the annuity contract is included in Marcia's gross estate.

Paul, a U.S. citizen, will avoid the Federal estate tax if he becomes a Canadian resident and owns no property located in the U.S. at the time of his death.

A majority of states currently do not impose any tax on transfers by death.

Barry pays State University for his dependent daughter's room and board. Barry has made a transfer that is subject to the Federal gift tax.

Match each statement with the correct choice. Some choices may be used more than once or not at all. -Cash donation to the reelection campaign of a member of the U.S. Congress.

In which of the following situations has a taxable gift occurred?

At the time of her death, Chloe was involved in three trust arrangements. Details regarding these trusts are summarized below. ∙ Trust D (FMV of $3,200,000) was created by Chloe. Under its terms, Chloe holds a life estate, with her children designated as the remainder beneficiaries. ∙ Trust E (FMV of $800,000) was created by Chloe's father. Chloe holds a life estate, with her children designated as the remainder beneficiaries. ∙ Trust F (FMV of $1,300,000) was created by Chloe's mother. Chloe's children hold a life estate, and the remainder interest is to pass to their children (i.e., Chloe's grandchildren). ​ As to these trusts, how much will be included in Chloe's gross estate?

Match each statement with the correct choice. Some choices may be used more than once or not at all. -Maggie purchased an insurance policy on Jim's life and designated Susan as the beneficiary.

A surviving spouse's share of the community property is not included in the deceased spouse's gross estate.

In community property states, not all property acquired after marriage by either spouse is community property.

Mark dies on March 6, 2016. Which, if any, of the following items is not included in his gross estate?

Match each statement with the correct choice. Some choices may be used more than once or not at all. -Community property

In 2015, Glen transferred several assets by gift to different persons. Glen dies in 2016. Information regarding the properties given is summarized below. $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Fair Market Value }$ $\begin{array}{lll}&\text { Date of Gift } & \text { Date of Death } \\\text { Insurance policy on Glen's life } & \$ 20,000 & \$ 200,000 \\\text { Unimproved land } & 890,000 & 900,000 \\\text { Stocks and bonds } & 600,000 & 800,000\end{array}$ ? The transfer of the land and the stocks and bonds resulted in a total gift tax of $60,000. As to these transactions, Glen's gross estate must include:

Sam purchases a U.S. savings bond which he registers as follows: "Sam, payable to Don upon Sam's death." A gift occurs when Sam purchases the bond.

In determining the Federal gift tax on a current gift:

The election of the alternate valuation date can affect the amount of a charitable deduction allowed to an estate for a bequest to a qualified charity.