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Exam 18: The Federal Gift and Estate Taxes

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Question 21

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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. Four years later Jim dies, and Susan collects the insurance proceeds.

A) In the current year, Debby, a widow, dies. Two years ago she inherited a large amount of wealth from her brother.
B) Death does not defeat an owner's interest in property.
C) Exists only if husband and wife are involved.
D) A type of state tax on transfers by death.
E) Must decrease the amount of the gross estate.
F) Annual exclusion not allowed.
G) Cumulative in effect.
H) Right of survivorship present as to type of ownership.
I) Avoids the terminable interest rule of the marital deduction.
J) Exemption equivalent.
K) Bypass amount.
L) No correct match provided.

M) A) and L)
N) F) and L)

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Question 22

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Match each statement with the correct choice. Some choices may be used more than once or not at all. -Land held as tenants by the entirety with surviving spouse. Decedent provided none of the funds.

A) In the current year, Debby, a widow, dies. Two years ago she inherited a large amount of wealth from her brother.
B) Death does not defeat an owner's interest in property.
C) Exists only if husband and wife are involved.
D) A type of state tax on transfers by death.
E) Must decrease the amount of the gross estate.
F) Annual exclusion not allowed.
G) Cumulative in effect.
H) Right of survivorship present as to type of ownership.
I) Avoids the terminable interest rule of the marital deduction.
J) Exemption equivalent.
K) Bypass amount.
L) No correct match provided.

M) D) and J)
N) A) and E)

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Question 23

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In 2004, Katelyn inherited considerable property when her father died. When Katelyn dies in 2016, her estate may be able to use § 2013 (credit for tax on prior transfers) as to some of the estate taxes paid by her father's estate.

If a donor has a fiscal year of July 1-June 30 for income tax purposes, this does not change the normal filing date for Form 709.

Matt and Patricia are husband and wife and live in Oregon. In 1980 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 2016, Matt dies first when the residence is worth $2 million. A correct statement as to these transactions is:

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

Match each statement with the correct choice. Some choices may be used more than once or not at all. -Howard establishes a trust, life estate to his children, remainder to the grandchildren. Under its terms, the trust is revocable by Howard. Howard later relinquishes the right to revoke the trust.

Pauline sells antique furniture to her daughter, Nicole, for $10,000. If the furniture is really worth $100,000, Pauline has made a gift to Nicole of $100,000.

Match each statement with the correct choice. Some choices may be used more than once or not at all. -Note receivable issued by a grandson and forgiven by the decedent in her will.

At the time of his death, Norton was involved in the following transactions. ∙ Owned land in joint tenancy with Emily. The land is worth $600,000 and was purchased by Norton 15 years ago for $150,000. ∙ Owned land in a tenancy by the entirety with his wife Amy. The land is worth $800,000 and was purchased by Norton five years ago for $450,000. ∙ Owned land in an equal tenancy in common with Noah. The land is worth $400,000 and was purchased by Norton four years ago for $300,000. ∙ Owned City of Dayton bonds worth $500,000. ​ What amount is included in Norton's gross estate?

Match each statement with the correct choice. Some choices may be used more than once or not at all. -Bank account held as joint tenant with mother. Mother provided all of the funds. Mother survives.

By his will, all of Rusty's property passes outright to his wife, Patsy. As Patsy was not given a general power of appointment or Rusty's executor did not make a QTIP election, Rusty's estate is not allowed a marital deduction.

Kim, a resident and citizen of Korea, dies during an operation at the Mayo Clinic in Rochester (MN). Because Kim died in the U.S., he will be subject to the Federal estate tax.

Homer and Laura are husband and wife. At the time of Homer's death in 2016, 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?

In 1985, 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 1992 when the trust is worth $1,500,000, and Paula dies in 2016 when the trust is worth $2,000,000. Which, if any, of the following is a correct statement?

Lila is the owner and beneficiary of a policy on the life of her husband, Austin. Upon Austin's death, the insurance proceeds paid to Lila do not qualify for the marital deduction.

At the time of his death, Raul owned a residence with his wife, Manuela, as joint tenants. The residence was purchased by Manuela ten years ago at a cost of $300,000 and has a fair market value of $1.4 million. Raul's estate will be allowed no marital deduction as to the property.

Match each statement with the correct choice. Some choices may be used more than once or not at all. -Ten cemetery lots purchased by decedent prior to death for use by himself and his family.

An estate tax is a tax on the right of an heir to receive property on the death of the owner.

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?