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Chapter 25 Transfer Taxes and Wealth Planning

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Question;Chapter 25;Transfer Taxes and Wealth Planning;True / False Questions;1. The;amount of the estate tax is directly related to the amount of taxable gifts.;True False;2. The;Federal transfer taxes are calculated using cumulative lifetime transfers.;True False;3. An;exemption equivalent is the amount of annual gifts that is automatically exempt;from the gift tax.;True False;4. The;exemption equivalent was repealed in 1976.;True False;5. The;unified credit is designed to allow a minimum amount of lifetime transfers;without triggering the imposition of a transfer tax.;True False;6. For 2014;the exemption equivalent for the estate tax is $5.34 million.;True False;7. The;marital and charitable deductions are common to both the estate tax and the;gift tax formulas.;True False;8. The;estate tax is imposed on testamentary transfers.;True False;9. The gift;tax is imposed on inter vivos (lifetime) transfers.;True False;10. The tax;rate schedule on taxable transfers has a maximum tax rate of 40% for 2014.;True False;11. A couple;who is married at the time of completing a gift can elect to file a joint gift;tax return.;True False;12. Only;complete gifts are subject to the Federal gift tax.;True False;13. A;completed gift must be irrevocably relinquished by the donor.;True False;14. A;gratuitous transfer of cash to an individual who uses the cash to pay medical;expenses is not subject to a gift tax.;True False;15. A future;interest is a right to receive income or property in the future.;True False;16. The annual;exclusion eliminates relatively small transfers of present interests in;property.;True False;17. The annual;exclusion applies to cumulative gifts made to each donee over the course of the;year.;True False;18. A transfer;of cash to a bank account held in joint tenancy with the right of survivorship;is not a completed gift.;True False;19. A;withdrawal of money from a bank account held in joint tenancy with the right of;survivorship may constitute a completed gift.;True False;20. 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.;True False;21. Both;spouses must consent to any gift-splitting election.;True False;22. The;gift-splitting election only applies to gifts made by taxpayers who reside in;community property states.;True False;23. A transfer;of a terminable interest will not generally qualify for a marital deduction.;True False;24. A;terminable interest in property is any interest that terminates during the;current year.;True False;25. A gift tax;return does not need to be filed unless the taxpayer has made current gifts in;excess of the unified credit.;True False;26. The tax on;cumulative taxable gifts is reduced by the unified credit regardless of whether;any unified credit was used in prior years.;True False;27. The;probate estate consists of all property owned by the decedent that is excluded;from the gross estate.;True False;28. No;deductions are allowed when calculating the taxable estate.;True False;29. Including;adjusted taxable gifts in the taxable estate causes these gifts to be taxed;twice, once under the gift tax and again under the estate tax.;True False;30. The gross;estate may contain property transfers that are not included in the probate;estate.;True False;31. The gross;estate will not include the value of clothes and other personal items owned by;the decedent at the time of death.;True False;32. 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 as tenants in common or as joint tenants with the right of;survivorship.;True False;33. 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.;True False;34. The gross;estate includes the value of half of real property owned by a decedent and;spouse in joint tenancy with the right of survivorship.;True False;35. The gross;estate always includes the value of half of any real property owned by a;decedent and another person in joint tenancy with the right of survivorship.;True False;36. Proceeds;of life insurance paid to the decedent's estate due to the death of the;decedent are included in the decedent's gross estate even if the decedent had;no ownership rights in the policy at the time of death.;True False;37. Property;is included in the gross estate at the value a willing buyer would pay a willing;seller, neither being under any compulsion to buy or to sell, and both having;reasonable knowledge of the relevant facts.;True False;38. A present;interest is the right to currently enjoy property or receive income payments;from property.;True False;39. The debts;of the decedent at the time of death are deducted in calculating the taxable;estate.;True False;40. The theft;of property included in the gross estate is only deductible in calculating the;taxable estate if the loss exceeds 10 percent of the decedent's adjusted gross;estate.;True False;41. The;testamentary transfer of property to a qualified charity is deductible in;calculating the taxable estate without any ceiling limitation.;True False;42. Adjusted;taxable gifts are included when calculating the taxable estate but are not;subject to double taxation because a tax credit is provided for taxes payable;on adjusted taxable gifts.;True False;43. A trust is;a legal entity whose purpose is to hold and administer property for;beneficiaries.;True False;44. A;fiduciary is a legal entity that can only exist for a year.;True False;45. A serial;gift strategy consists of arranging a trust to maximize the value of the;unified credit.;True False;46. A serial;gift strategy uses multiple gifts to maximize the value of the annual;exclusion.;True False;47. A bypass;provision in a will requires a decedent to have a taxable estate in order to;use a unified credit to reduce total estate taxes on a married couple.;True False;48. Property;inherited from a decedent has an adjusted basis equal to the value of the;property included in the decedent's estate.;True False;49. The income;tax benefit derived from a step-up in tax basis should be measured against the;estate tax cost of including the property in the decedent's gross estate.;True False;50. Life;insurance is an asset that can be used to fund a trust to support a surviving;spouse and, yet, may not be included in the decedent's gross estate.;True False;Multiple Choice Questions;51. A;gratuitous transfer of property made during the lifetime of the donor is;called;A. an;incomplete gift.;B. a;testamentary transfer.;C. a taxable;gift.;D. an inter;vivos transfer.;E. All of;these.;52. The;unified credit is designed to;A. apply;only to taxable transfers included in the gross estate.;B. prevent;taxation of cumulative transfers that do not exceed a certain minimum amount.;C. apply to;amounts not already eliminated by the exemption equivalent.;D. exclude;up to $1 million for any individual transfer.;E. None of;these.;53. The estate;and gift taxes share several common features. Which of the following;characteristics are common to both the estate and gift taxes?;A. A unified;credit and a marital deduction.;B. A;charitable deduction and an annual exclusion.;C. A;gift-splitting election and a deduction for income taxes paid by the fiduciary.;D. A;charitable deduction and the unused spousal exemption equivalent.;E. All of;these are characteristics common to both the gift and the estate tax.;54. Which of;the following statements is(are) true?;A. The same;transfer tax rate schedule is used to calculate both the estate tax and the;gift tax.;B. The;transfer tax rate schedule is regressive in nature.;C. The;amount of the unified credit varies according to whether the taxable transfer;is inter vivos or testamentary.;D. The;exemption equivalent automatically offsets transfers in calculating cumulative;taxable transfers.;E. All of;these are true.;55. Which of;the following statements is(are) true for both gratuitous and testamentary;transfers?;A. A unified;credit of up to $1 million reduces the tax on any transfer.;B. An annual;exclusion offsets any transfer up to $12,000.;C. An;election can be made to split a transfer between spouses.;D. A;charitable and a marital deduction are allowed in computing the taxable;transfer.;E. All of;these are true.;56. The estate;and gift taxes share several common features. Which of the following characteristics;is common to both the estate and gift taxes?;A. A marital;deduction and a deduction for casualty losses.;B. A marital;deduction for transfers of all terminable interests.;C. The tax;rate schedule for calculating gross transfer taxes.;D. A;charitable deduction and an annual exclusion.;E. None of;these list characteristics common to both the gift and the estate tax.;57. Which of;the following is a true statement about the Federal gift tax return (Form 709)?;A. Form 709;is due by the 15th day of the ninth month following the date of the gift.;B. Form 709;must be filed if a taxpayer wishes to elect gift splitting.;C. Form 709;need not be filed unless a taxpayer's taxable gifts exceed the exemption;equivalent.;D. Form 709;is due nine months after the death of the decedent.;E. None of;these is true.;58. Which of;the following transfers is a completed gift?;A. Payment;of child support by a former spouse.;B. Transfer;of property to a revocable trust.;C. Transfer;of cash to a bank account held in joint tenancy with the right of survivorship.;D. Income;paid to the beneficiary of a revocable trust.;E. None of;these is a completed gift.;59. Which of;the following transactions would not utilize the "Section 7520 rate;to calculate the value of the transfer?;A. A;transfer of property with a retained life estate.;B. A;transfer of property to a spouse.;C. A;transfer of a remainder interest in real property.;D. A;transfer of a 10-year term certain in real property.;E. None of;these utilizes the "Section 7520 rate" in the calculation of the;value of the property.;60. The;calculation of the value of a life estate in a trust generally does not depend;upon which of the following factors?;A. the age;of the life tenant.;B. the;Section 7520 interest rate.;C. the value;of the property at the time of the transfer.;D. the;manner in which the trust corpus is invested.;E. All of;these.;61. This year;Anthony transferred $250,000 of bonds to a trust with directions to the trustee;to pay income to his son for the next 20 years. After 20 years the trust corpus;would revert to Anthony. Which of the following is a true statement?;A. Anthony;has made a $250,000 gift.;B. Anthony;has made a $237,000 taxable gift.;C. Anthony;has not yet made a completed gift.;D. Anthony;has made a completed gift of the income interest only.;E. None of;these is true.;62. 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 $15,000 of;income to the aunt. Which of the following is a true statement?;A. Natalie;has made a completed gift of $500,000.;B. Natalie;has made a taxable gift of $1,000.;C. Natalie;has not made a completed gift because the trust is revocable.;D. Natalie;has made a taxable gift of $474,000.;E. None of;these.;63. Which of;the following is a completed taxable gift?;A. $20,000;in cash contributed to the committee to reelect Senator BlowHard.;B. $15,000;in cash given to Valley Hospital for the care of a neighbor who was in an auto;accident.;C. $18,000;in cash given to a needy student to pay for college tuition.;D. $55,000;in cash transferred to a former spouse under a written property settlement;shortly after a divorce.;E. None of;these is a completed taxable gift.;64. 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 $236,000.;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 $56,000.;E. None of;these - Don did not make a taxable gift.;65. This year;Brent purchased season baseball tickets in the exclusive sky club. The price of;the tickets was $60,000, and Brent divided the tickets equally with his two;brothers. Has Brent made a taxable gift and, if so, in what amount?;A. Brent;made a taxable gift of $46,000.;B. Brent;made two taxable gifts of $17,000 each.;C. Brent;transferred the tickets for love and affection so no gift tax is imposed.;D. Brent;made two taxable gifts of $6,000.;E. None of;these.;66. Christian;transferred $60,000 to an irrevocable trust for the benefit of his three;daughters. The three daughters share income equally for five years and then the;corpus of the trust is to be divided equally between them. What is the amount;of the taxable gifts, if any, made by Christian?;A. $60,000;B. $47,000;C. $34,000;D. $21,000;E. None of;these - the amount of the taxable gifts cannot be ascertained without valuing;each income interest.;67. This year;Samantha gave each of her three nephews birthday gifts of $10,000 in cash. At;Christmas, Samantha gave each of her three nephews Christmas gifts of an;additional $5,000 in cash. What is the amount of the taxable gifts, if any;made by Samantha this year?;A. $3,000;B. $32,000;C. $45,000;D. zero -;none of the gifts exceed the annual exclusion.;E. None of;these.;68. Jonathan;transferred $90,000 of cash to a trust this year for the benefit of Hannah, age;10. The trustee has the discretion to distribute income or corpus (principal);for Hannah's benefit and is required to distribute all assets to Hannah (or her;estate) not later than Hannah's 21st birthday. What is the amount of the;taxable gift?;A. $90,000;B. $76,000;C. $64,000;D. zero -;there is no completed gift until the trustee makes a distribution from the;trust.;E. None of;these.;69. Matthew;and Addison are married and live in Michigan, a common-law state. For the;holidays Addison gave cash gifts of $30,000 to each of her two sons, and;Matthew gave $40,000 to his daughter. What is the amount of Addison's taxable;gifts if Matthew and Addison opt to gift split?;A. $58,000;B. $8,000;C. $16,000;D. $4,000;E. None of;these;70. Andrew and;Brianna are married and live in Texas, a community property state. For their;birthdays this year Andrew gave cash gifts of $20,000 to each of his two;daughters, and Brianna gave $30,000 to her niece. What is the amount of;Andrew's taxable gifts?;A. $1,000;B. $14,000;C. $28,000;D. zero if;Andrew and Brianna elect to split gifts.;E. None of;these.;71. Jayden;gave Olivia a ring when she agreed to marry him. The ring is a family heirloom;valued at $67,000. What is the amount of the taxable gift?;A. zero -;the marital deduction offsets the gift as long as Jayden and Olivia are married;by year end.;B. $53,000;C. $67,000;D. zero -;this transfer is not gratuitous.;E. None of;these.;72. Alexis;transferred $400,000 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 $72,000, what is the total;amount of the taxable gifts?;A. $386,000;B. $59,000;C. $374,000;D. $324,000;E. None of;these.;73. This year;Nathan transferred $2 million to an irrevocable trust established for the;benefit of his nephew. The trustee is directed to accumulate income for the;next 5 years before distributing the trust corpus to Nathan's nephew. In past;years Nathan has made taxable gifts of $6 million and used a unified credit on;an exemption equivalent of $5 million. What amount of gift tax, if any, must;Nathan remit?;A. $300,000;B. $400,000;C. $345,450;D. zero -;there is a $10.68 million exemption equivalent;E. None of;these. The amount of tax cannot be estimated without the use of a tax rate;schedule.;74. At his;death Trevor had a probate estate consisting of $4 million of property. Which;of the following is a true statement about Trevor's estate or estate tax?;A. Trevor;must have a taxable estate of at least $4 million.;B. Trevor;must have an adjusted gross estate of at least $4 million.;C. Trevor;must have an estate tax base (cumulative taxable transfers) of at least $4;million.;D. Trevor;must have a gross estate of at least $4 million.;E. None of;these is necessarily true.;75. 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;these is necessarily true.;76. 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?;A. Tricia;must have a taxable estate over $8 million.;B. Tricia's;taxable estate will not exceed $8 million.;C. Tricia;must have a probate estate tax of zero.;D. Tricia;must have a gross estate tax of zero.;E. None of;these is necessarily true.;77. At her;death Tricia owned a life insurance policy on her life that paid her daughter;$500,000 upon her death. The policy was only valued at $25,000 prior to;Tricia's death. What amount, if any, is included in Tricia's gross estate?;A. $500,000;B. $25,000;C. $25,000;if Tricia transferred ownership of the policy within three years of her date of;death.;D. zero -;life insurance proceeds due to the death of the decedent are not included in;the decedent's gross estate.;E. zero if;Tricia's daughter refused to accept the proceeds.;78. At her;death Siena owned real estate worth $200,000 that was titled with her sister in;joint tenancy with the right of survivorship. Siena contributed $50,000 to the;total cost of the property and her sister contributed the remaining $75,000.;What amount, if any, is included in Siena's gross estate?;A. $50,000;B. $125,000;C. $80,000;D. $100,000;E. None of;these is correct.;79. At his;death Tyrone's life insurance policy paid his estate $85,000. What amount, if;any, is included in Tyrone's gross estate?;A. $85,000;B. $85,000;if Tyrone had an incident of ownership of the policy at the time of his death.;C. zero if;Tyrone did not transfer any ownership of the policy within three years of his;date of death.;D. zero -;life insurance proceeds due to the death of the decedent are not included in;the gross estate.;E. zero if;Tyrone's estate uses the insurance proceeds to pay Tyrone's estate tax.;80. At his;death Stanley owned real estate worth $345,000 with two other individuals as;equal tenants in common. Stanley contributed $50,000 to the $100,000 total cost;of the property. What amount, if any, is included in Stanley's gross estate?;A. $50,000;B. $172,500;C. $345,000;D. $115,000;E. None of;these is correct.;81. At her;death Serena owned real estate worth $210,000 with her spouse in joint tenancy;with the right of survivorship. Serena contributed $50,000 to the original cost;of the property and her spouse contributed the remaining $100,000. What amount;if any, is included in Serena's gross estate?;A. $50,000;B. $105,000;C. $80,000;D. zero -;this property qualifies for the marital deduction.;E. None of;these is correct.;82. 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 30th of this year;and was survived by Harold who did not remarry. The parcel of real property was;worth $250,000 on January 30th of this year but was only worth $220,000 at year;end. What amount, if any, is included in Mary's gross estate?;A. $250,000;B. $220,000;C. $125,000;D. $110,000;E. zero -;Mary had no ownership interest in the property at her death.;83. At his;death Jose owned real estate worth $22 million but subject to a mortgage of $7;million. Which of the following is a true statement?;A. $22;million is included in Jose's gross estate.;B. $15;million is included in Jose's gross estate.;C. The $7;million mortgage must be paid by Jose's estate.;D. The $7;million mortgage is not deductible if Jose's will transfers the property to a;charity.;E. All of;these;84. At her;death Emily owned real estate worth $2.5 million and other property worth $1;million. Property taxes of $200,000 were accrued on the real estate at the time;of Emily's death. Which of the following is a true statement?;A. Emily's;gross estate is $3.3 million.;B. Emily's;taxable estate is $3.5 million.;C. Emily's;adjusted gross estate is $3.3 million.;D. Emily's;estate tax base is $3.5 million.;E. None of;these is true.;85. Which of;the following is a true statement?;A. Executor's;fees paid by an estate are deductible in computing the gross estate.;B. Funeral;expenses for the decedent paid by an estate are deductible in computing the;adjusted gross estate.;C. An;executor can choose to deduct the decedent's funeral expenses on either the;estate tax return or the estate's income tax return.;D. An executor;can only deduct the costs of administering the decedent's estate on the;estate's income tax return.;E. None of;these is true.;86. 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?;A. $32,000;B. $37,000;C. $56,000;D. $61,000;E. None of;these.;87. Christopher's;residence was damaged by a storm during the administration of his estate.;Christopher's executor paid $120,000 to repair the residence after the storm.;Which of the following is a true statement?;A. A;casualty loss of $120,000 can be deducted on Christopher's final individual;income tax return.;B. The;casualty loss deduction is limited to the loss in excess of 10 percent of;Christopher's AGI.;C. Christopher's;executor has the option of deducting a loss of $120,000 on the estate tax;return or on the estate's income tax return.;D. No;casualty loss deduction is available for calculating the estate tax.;E. None of;these is true.;88. Chloe's;gross estate consists of the following property valued at the date of death;Chloe's real estate is encumbered by a mortgage of $450,000;and Chloe's executor paid her funeral costs of $6,000 and charged fees for;$24,000. Which of the following is a true statement?;A. Chloe's;adjusted gross estate is at least $7,020,000.;B. Chloe's;taxable estate is at least $7,020,000.;C. Chloe's;taxable estate is $7,050,000.;D. Chloe's;estate will calculate the tentative estate tax on $7.5 million.;E. None of;these is true.;89. Tracey is;unmarried and owns $7 million in stock and bonds. What is the result if Tracey;dies this year and leaves all of her property to a qualified charity?;A. Tracey's;gross estate will be zero.;B. Tracey's;estate tax basis will be zero.;C. Tracey's;taxable estate will be zero.;D. Tracey's;estate will have a tentative estate tax of zero.;E. None of;these.;90. Madison;was married at the time of her death and her gross estate consisted of $22;million in stock and bonds. Madison left all of her property to her spouse.;What is the result?;A. Madison's;taxable estate will be zero.;B. Madison's;surviving spouse will have an income tax basis in the inherited property of;zero.;C. Madison's;adjusted gross estate will be zero.;D. Madison's;estate will have a tentative estate tax of zero.;E. None of;these.;91. Which of;the following is a true statement?;A. A;remainder interest held by the decedent at the time of death is not included in;the decedent's gross estate.;B. The value;of a remainder interest depends in part on the Section 7520 interest rate at;the time of death.;C. The value;of a remainder interest in a life estate is independent of the age of the life;tenant.;D. The value;of a life estate does not depend upon the age of the life tenant.;E. None of;these is true.;92. 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?;A. Ethan can;claim a marital deduction for the vacation home if he bequeaths it to Emma.;B. Ethan;cannot claim a marital deduction if he bequeaths a life estate in the vacation;home to Emma.;C. Ethan can;claim a marital deduction for half the value of the vacation home if it was;owned with Emma in joint tenancy with the right of survivorship.;D. Ethan can;claim a charitable deduction if he bequeaths it to a qualified charity.;E. All of;these are true.;93. Adjusted;taxable gifts are added to the taxable estate to accomplish which of the;following objectives?;A. Prevent;double taxation of previously taxed gifts.;B. Increase;the marginal tax rate on previously taxed gifts.;C. Increase;the marginal tax rate on the taxable estate.;D. Remove;inter vivos transfers from cumulative taxable transfers.;E. None of;these.;94. A unified;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 unified credit;amount?;A. The;tentative estate tax is reduced by only taxes payable on adjusted taxable gifts;rather than gross gift taxes.;B. The;unified credit only offsets the exemption equivalent.;C. The;unified credit cannot be used to offset gift taxes on adjusted taxable gifts.;D. The;unified credit varies in amount from year to year.;E. None of;these.;95. The;generation-skipping tax is designed to accomplish which of the following?;A. generate;additional revenues to supplement the estate tax.;B. prevent;the avoidance of transfer taxes (both estate and gift tax) through transfers;that skip a generation of recipients.;C. eliminate;the possibility that the estate tax can be avoided by gifts in contemplation of;death.;D. replace;the gift tax on distributions from trusts.;E. None of;these.;96. Which of;the following is a true statement?;A. A;fiduciary entity is a legal entity that takes possession of property for the;benefit of a person.;B. An estate;is a fiduciary that comes into existence upon a person's death to transfer the;decedent's real and personal property.;C. A trust;is also a fiduciary whose purpose is to hold and administer the corpus for;other persons (beneficiaries).;D. An estate;exists only temporarily, but a trust may have a prolonged or even indefinite;existence.;E. All of;these are true.;97. Which of;the following is a true statement?;A. A serial;gift strategy utilizes inter vivos gifts to multiple donees over multiple years;to maximize the annual exclusion.;B. A serial;gift strategy works well even if the gifts don't qualify as present interests.;C. A bypass;trust avoids all estate taxes on the estate of the first spouse to die.;D. The;income tax savings from holding appreciated property until death is always;outweighed by the additional estate tax imposed on the property.;E. None of;these is true.;98. Which of;the following is a true statement?;A. Leaving;all property to the surviving spouse maximizes the marital deduction and;therefore minimizes total transfer taxes on the estates of both spouses.;B. A bypass;provision in the will of the deceased spouse is designed to use the unified;credit of the deceased spouse by transferring property to beneficiaries other;than the surviving spouse.;C. Serial;gifts are limited in scope because only $10,000 can be transferred each year;tax-free to any specific donee.;D. Serial;gifts can move significant amounts of wealth only if employed by multiple;donors.;E. None of;these is true.;Essay Questions;99. Andrea;transferred $500,000 of stock to a trust, with income to be paid to her niece;for 20 years (value $125,000) and the remainder to her nephew (value $375,000).;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.;100. This year;Alex's friend, Kimberly, was disabled. Alex paid $25,000 to Kimberly's doctor;for medical expenses. In addition, Alex also paid $15,000 to Kimberly so that;her son could afford tuition at State University this year. Has Alex made;taxable gifts, and if so, in what amounts?;101. This year;Carlos and Hailey purchased realty for $480,000 and took title as equal tenants;in common. However, Hailey was able to provide only $200,000 of the purchase;price and Carlos paid the remaining $280,000. Has Carlos made a taxable gift to;Hailey, and if so, in what amount?;102. Last year;Brandon opened a savings account with a deposit of $45,000. The account was in;the name of Brandon and Melanie, joint tenancy with the right of survivorship.;Melanie did not contribute to the account, but this year she withdrew $18,000.;Has Brandon made a taxable gift to Melanie, and if so, in what amount?;103. 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.;104. This year;Evelyn created an irrevocable trust to provide for Ed, her 32-year-old nephew;and Ed's family. Evelyn transferred $150,000 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.;105. 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.;106. James and;Jasmine live in a community property state. This year they transferred $800,000;of property to an irrevocable trust that provides their son, Aaron, a life;estate and their daughter, Lauren, the remainder. At the time of the gift, the;Table S value for Aaron was.18031. What is the amount, if any, of the taxable;gifts?;107. Ryan placed;$280,000 in trust with income to Stephen for his life and the remainder to;Kayla (or her estate). At the time of the gift, given the prevailing interest;rate, Stephen's life estate was valued at $165,000 and the remainder at;$115,000. What is the amount, if any, of Ryan's taxable gifts?;108. 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 21st;birthday. What is the amount, if any, of the taxable gift?;109. 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?;110. This year;Nicholas earned $500,000 and used it to purchase land in joint tenancy with a;right of survivorship with Nevaeh. Has Nicholas made a taxable gift to Nevaeh;and, if so, in what amount?;111. Grace;transferred $800,000 into trust with the income to be paid annually to her;spouse, Isaiah, for life and the remainder to Taylor. Calculate the amount of;the taxable gifts from the transfers.;112. Ricardo;transferred $1,000,000 of cash to State University for a new sports complex.;Calculate the amount of the taxable gift.;113. Angel and;Abigail are married and live in a common law state. Angel and Abigail own a;parcel of realty as joint tenants with the right of survivorship. In addition;Abigail owns another parcel of realty in her name alone. If Abigail should die;when the jointly-owned realty is worth $1 million a

 

Paper#38074 | Written in 18-Jul-2015

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