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Exam 14: Transfer Taxes and Wealth Planning

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Question 41

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This year Alex's friend, Kimberly, was disabled. Alex paid $25,000 to Kimberly's doctor for medical expenses. In addition, Alex also paid $15,000 to Kimberly so that her son could afford tuition at State University this year. Has Alex made taxable gifts, and if so, in what amounts?

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The payment to Kimberly was a taxable gi...

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Question 42

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At her death Serena owned real estate worth $210,000 with her spouse in joint tenancy with the right of survivorship. Serena contributed $50,000 to the original cost of the property and her spouse contributed the remaining $100,000. What amount, if any, is included in Serena's gross estate?

A) $50,000
B) $105,000
C) $80,000
D) zero - this property qualifies for the marital deduction.
E) None of these

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

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Question 43

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This year Anthony transferred $250,000 of bonds to a trust with directions to the trustee to pay income to his son for the next 20 years. After 20 years the trust corpus would revert to Anthony. Which of the following is a true statement?

Gabriel had a taxable estate of $6 million when he died in 2016. Calculate the amount of estate tax due (if any) if Gabriel made prior taxable gifts in 2005 totaling $1 million at which time he claimed a unified credit of $1 million and paid no tax. Gabriel was unmarried at his death.

For the holidays, Samuel gave a necklace worth $35,000 to Jennifer and jewelry worth $44,000 to Savannah. Samuel is married to Wendy and they live in a community property state. Has Samuel made any taxable gifts and, if so, in what amounts?

The tax rate schedule on taxable transfers has a maximum tax rate of 40% for 2016.

The testamentary transfer of property to a qualified charity is deductible in calculating the taxable estate without any ceiling limitation.

The theft of property included in the gross estate is only deductible in calculating the taxable estate if the loss exceeds 10 percent of the decedent's adjusted gross estate. Casualty and theft losses are deductible without any floor limitation.

An exemption equivalent is the amount of annual gifts that is automatically exempt from the gift tax. The amount of cumulative taxable transfers a person can make without exceeding the unified credit is the exemption equivalent.

The unified credit is designed to:

A serial gift strategy consists of arranging a trust to maximize the value of the unified credit.

Ashley owns a whole-life insurance policy worth $25,000 that directs the insurance company to pay the beneficiary $500,000 on her death. Ashley pays the annual policy premiums and has the power to designate the beneficiary of the policy. What value of the policy, if any, would be included in Ashley's estate upon her death?

Which of the following is a true statement?

The income tax benefit derived from a step-up in tax basis should be measured against the estate tax cost of including the property in the decedent's gross estate.

Including adjusted taxable gifts in the taxable estate causes these gifts to be taxed twice, once under the gift tax and again under the estate tax.

The estate tax is imposed on testamentary transfers.

A withdrawal of money from a bank account held in joint tenancy with the right of survivorship may constitute a completed gift.

Natalie transferred $500,000 of bonds to a revocable trust with directions to the trustee to pay income to her aunt for five years after which the corpus is to be distributed to Natalie's niece. At year end, the trustee paid $15,000 of income to the aunt. Which of the following is a true statement?

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

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 21^st birthday. What is the amount, if any, of the taxable gift?