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Exam 18: The Federal Gift and Estate Taxes

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Question 71

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At the time of his death, Jason was a participant in Silver Corporation's qualified pension plan and group term life insurance. The balance of the survivorship feature in his pension plan is: The term insurance has a maturity value of $100,000. All amounts are paid to Pam, Jason's daughter. One result of these transactions is:

A) Pam must pay income tax on $300,000.
B) Pam must pay income tax on $1,100,000.
C) Jason's gross estate must include $1,200,000.
D) Jason's gross estate must include $1,500,000.
E) None of the above.

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

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Question 72

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Doyle died in 2000 and by will created a trust with the following provisions: "life estate to my wife, Grace, remainder upon her death to our children." Grace dies this year. Is the trust Doyle created included in Grace's gross estate? Explain.

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If Doyle's executor made the Q...

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Question 73

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Frank owns an insurance policy on the life of Cynthia, with Leon as the designated beneficiary. Upon Cynthia's prior death, Frank is treated as making a gift of the insurance proceeds to Leon.

Classify each statement appearing below. a. No taxable transfer occurs b. Gift tax applies c. Estate tax applies -Darlene holds a general power of appointment over the income from a trust created by her brother. Darlene dies during the year without having exercised the power. The income is distributed to children of the brother in accordance with the terms of the trust instrument.

Transfers to political organizations are exempt from the application of the Federal gift tax.

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.

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

Concerning the election to split gifts under § 2513, which of the following statements is incorrect?

Manfredo makes a donation of $50,000 to the church where he was baptized in Mexico City. The gift does not qualify as a charitable contribution for Federal income tax purposes.

Sandy pays a local college for her non­dependent boyfriend's tuition. The payment is subject to the Federal gift tax.

Manuel, a citizen and resident of Argentina, makes a gift to his children of a ranch located in Colorado. Manuel will be subject to the U.S. gift tax.

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.

Ray purchases U.S. savings bonds which he lists as "Ray and Donna" as co­owners. Donna is Ray's daughter. Donna predeceases Ray. No gift or estate tax consequences result from this situation.

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. -Mortgage on land included in gross estate and willed to decedent's children.

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. 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. -Election to split gifts (§ 2513)

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 the 10,000 shares.

Harry and Brenda are husband and wife. Using her funds, Brenda purchases real estate which she lists as: "Harry and Brenda, tenants by the entirety with right of survivorship." If Brenda dies first, all of the value of the real estate will be included in her gross estate.

Joint tenancies and tenancies by the entirety avoid probate, while tenancies in common and community property do not. Why?

A timely issued disclaimer by an heir transfers the property to someone else without a Federal gift tax result.

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