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Exam 14: Transfer Taxes and Wealth Planning

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Question 61

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The probate estate will include the total value of all real property owned by the decedent at the time of death regardless of whether the decedent co-owned the property asa tenant in common or asa joint tenant with the right of survivorship.

A) True
B) False

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Question 62

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Ashley owns a whole-life insurance policy worth $26,500 that directs the insurance company to pay the beneficiary $530,000 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?

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Question 63

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This year Evelyn created an irrevocable trust to provide for Ed, her 32-year-old nephew, and Ed's family. Evelyn transferred $145,000 to the trust and named a bank as the trustee. The trust was directed to pay income to Ed until he reaches age 35 (three years from now), and at that time the trust is to be terminated and the corpus is to be distributed to Ed's two children (or their estates). Determine the amount, if any, of the taxable gift. The relevant interest rate is 6 percent. (Round your intermediate calculation to three decimal places.)

Which of the following is a true statement?

The annual exclusion applies to cumulative gifts made to each donee over the course of the year.

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.

This year Maria transferred $600,000 to an irrevocable trust that pays equal shares of income annually to four cousins (or their estates) for the next eight years. At that time, the trust is terminated and the corpus of the trust reverts to Maria. Determine the amount, if any, of the current gifts and the taxable gifts if the relevant interest rate is 6 percent and Maria is married and elects to gift-split with her spouse?

Only complete gifts are subject to the federal gift tax.

Which of the following is a true statement?

Adrian owns two parcels of real estate. Parcel #1 is worth $400,000 and Parcel #2 is worth $660,000. Adrian plans to bequeath Parcel #1 directly to his spouse, Sofia, and leave her a life estate in Parcel #2. What amounts will be included in Adrian's taxable estate for these two parcels?

Proceeds of life insurance paid due to the death of the decedent are included in the decedent's gross estate if the decedent had the right to designate the beneficiary of the policy.

This year Samantha gave each of her three nephews birthday gifts of $10,150 in cash. At Christmas, Samantha gave each of her three nephews Christmas gifts of an additional $6,060 in cash. What is the amount of the taxable gifts, if any, made by Samantha this year?

The debts of the decedent at the time of death are deducted in calculating the taxable estate.

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 $16,000 of income to the aunt. Which of the following is a true statement?

A serial gift strategy uses multiple gifts to maximize the value of the annual exclusion.

The executor of Isabella's estate incurred administration expenses of $32,000 and paid $5,000 in funeral expenses. The executor charged the estate for $24,000 in fees. What is the maximum amount Isabella's estate can deduct in computing the adjusted gross estate?

The gift-splitting election only applies to gifts made by taxpayers who reside in community-property states.

Harold and Mary are married and live in a community-property state. During the marriage Harold bought a parcel of real estate for $100,000 in community funds and titled the property in his name alone. Mary died on January 30 ^th of this year and was survived by Harold, who did not remarry. The parcel of real property was worth $250,000 on January 30 ^th of this year but was only worth $220,000 at year-end. What amount, if any, is included in Mary's gross estate?

Which of the following statements is (are) true?

This year Carlos and Hailey purchased realty for $380,000 and took title as equal tenants in common. However, Hailey was able to provide only $160,000 of the purchase price and Carlos paid the remaining $220,000. Has Carlos made a taxable gift to Hailey, and if so, in what amount?