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Exam 17: The Federal Gift and Estate Taxes

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Question 101

True/False

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If interest is provided for in loans between related parties,there is no imputed interest,as a gift loan does not result.

A) True
B) False

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Question 102

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Winston and Ginger are husband and wife and have always lived in Texas.At the time of Winston's prior death,he was insured in the amount of $1,000,000.The policy was taken out after their marriage,and premiums were paid 50% from community funds and 50% from Winston's separate property.The designated beneficiary of the policy is Harry,Ginger's son by a prior marriage.As to the policy proceeds:

A) $500,000 is included in Winston's gross estate, and Ginger has made a gift to Harry of $500,000.
B) $750,000 is included in Winston's gross estate, and Ginger has made a gift to Harry of $250,000.
C) $1,000,000 is included in Winston's gross estate.
D) $750,000 is included in Winston's gross estate.
E) None of the above.

F) B) and E)
G) B) and D)

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Question 103

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Classify each statement appearing below. a.No taxable transfer occurs b.Gift tax applies c.Estate tax applies -Under her father's will,Faith is to receive 10,000 shares of GE common stock.Eight months after her father's death,Faith disclaims 5,000 shares.

Classify each statement appropriately. a.Deductible from the gross estate in arriving at the taxable estate. b.Not deductible from the gross estate in arriving at the taxable estate -Casualty loss to property after the death of the owner.

Alvin and Lindsay are husband and wife and have always lived in New York,a common law state.In 1990 and using separate funds,they bought an annuity from an insurance company-the purchase price was furnished 1/3 by Alvin and 2/3 by Lindsay.Under the terms of the contract,Alvin is to receive $20,000 per month for life when he reaches age 65. If Lindsay survives Alvin,she is to receive $15,000 per month for her life.Alvin dies first,at which time the value of Lindsay's survivorship annuity is $1,200,000.As to this annuity,how much (if any)is included in Alvin's gross estate?

Classify each statement appropriately. a.Deductible from the gross estate in arriving at the taxable estate. b.Not deductible from the gross estate in arriving at the taxable estate -State income taxes accrued prior to death.

The deemed paid adjustment compels a taxpayer to claim as a credit for a past gift the tax that would have been paid under current rates rather than the tax that was actually paid. a.What is the justification for this rule? b.Does the application of the rule always operate in favor of a taxpayer?

Harry and Brenda are husband and wife.Using his funds,Harry purchases real estate which he lists as: "Harry and Brenda,tenants by the entirety with right of survivorship." If Brenda dies first,none of the real estate will be included in her gross estate.

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 the current year,Hal dies first when the land is worth $3,000,000.As to the land,Hal's gross estate must include:

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.

At the time of his death in 2008,Murray owed Federal gift tax on a gift he had made in 2003.Murray's estate cannot claim an estate tax deduction for the gift tax it pays.

In what manner does the tax law favor contributions to qualified tuition plans under § 529?

A surviving spouse's dower interest is included in the deceased spouse's gross estate.

Rachel owns an insurance policy on the life of Albert with Belle as the designated beneficiary.Upon Rachel's prior death,nothing regarding this policy is included in her gross estate.

At the time of her death on September 10,2008,Kara was involved in the following transactions. As to these transactions,Kara's gross estate includes:

At one point,the tax rates applicable to transfers by gift were lower than those applying to transfers by death.

Match each statement with the correct choice. Some choices may be used more than once or not at all. a.In the current year, Debby, a widow, dies. Two years ago she inherited a large amount of wealth from her brother. b.Scheduled to be eliminated by 2010. c.Exists only if owners are husband and wife. d.A type of state death tax. e.A certificate of deposit listed as "B. Brown, payable on proof of death to my daughter, Evelyn." 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.Exclusion amount k.Replaced by a deduction. l.No correct match provided. -Future interest

Death does not defeat a deceased spouse's interest in community property.

Pursuant to Corey's will,Emma (Corey's sister) inherits his property. Emma dies later. The estate tax attributable to the inclusion of the property in Corey's gross estate was $300,000. The estate tax attributable to the inclusion of the property in Emma's gross estate is $400,000. Emma's credit for the tax on prior transfers (under§ 2013) is: