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Exam 25: Transfer Taxes and Wealth Planning

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Question 61

Multiple Choice

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At his death Titus had a gross estate consisting of $6 million of property. Which of the following is a true statement about Titus' estate or estate tax?

A) Titus must have a probate estate of at least $6 million.
B) Titus must have an adjusted gross estate of at least $6 million.
C) Titus must have cumulative taxable transfers of at least $6 million.
D) Titus must have a tentative transfer tax calculated on at least $2 million of transfers.
E) None of the choices are necessarily true.

F) A) and D)
G) None of the above

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Question 62

Multiple Choice

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This year Don and his son purchased real estate for an investment. The price of the property was $500,000, and the title named Don and his son as joint tenants with the right of survivorship. Don provided $320,000 of the purchase price and his son provided the remaining $180,000. Has Don made a taxable gift and, if so, in what amount?

A) Don has made a taxable gift of $205,000.
B) Don has made a taxable gift of $70,000.
C) Don has made a taxable gift of $22,000.
D) Don has made a taxable gift of $55,000.
E) None of the choices are correct-Don did not make a taxable gift.

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

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Question 63

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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?

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

At his death Tyrone's life insurance policy paid his estate $85,000. What amount, if any, is included in Tyrone's gross estate?

Which of the following is a true statement?

When a gift-splitting election is made, gifts made by either spouse during the year will be treated as if each spouse made one-half of the transfer.

Ethan owned a vacation home at the time of his death. Which of the following is a true statement if Ethan was married to Emma and resided in a common-law state at the time of his death?

An applicable credit is subtracted in calculating both the gift tax and the estate tax. Why doesn't this calculation have the effect of increasing the total applicable credit amount?

A trust is a legal entity that can only exist for a year.

The calculation of the value of a life estate in a trust generally does not depend upon which of the following factors?

Ava transferred $2.05 million of real estate into an irrevocable trust for her son, Luis. The trustee was directed to retain income until Luis' 21^st birthday and then pay him the corpus of the trust. Ava retained the power to require the trustee to pay income to Luis at any time, and retained the right to the assets if Luis predeceased her. What amount of the trust, if any, will be included in Ava's estate if she died shortly after making the transfer?

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?

Aiden transferred $2 million to an irrevocable trust with income to Valeria for her life and the remainder to Jocelyn (or her estate). Calculate the value of the remainder and the life estate if Valeria's age and the prevailing interest rate result in a Table S discount factor for the remainder of 0.47.

Andrea transferred $655,000 of stock to a trust, with income to be paid to her niece for 20 years (value $192,000)and the remainder to be paid to her nephew (value $463,000). Andrea named a bank as independent trustee but retained the power to determine how much income, if any, will be paid in any particular year. What is the amount of the taxable gift, if any? Explain your answer.

Alexis transferred $456,000 to a trust with directions to pay income to her spouse, William, for his life. After William's death the corpus of the trust will pass to William's son. If the life estate is valued at $76,000, what is the total amount of the taxable gifts?

Property inherited from a decedent has an adjusted basis equal to the value of the property included in the decedent's estate.

At her death Tricia had an adjusted gross estate consisting of $8 million of property. Which of the following is a true statement about Tricia's estate or estate tax?

The tax rate schedule on taxable transfers has a maximum tax rate of 40percent.

The applicable credit is designed to allow a minimum amount of lifetime transfers without triggering the imposition of a transfer tax.