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Exam 14: Transfer Taxes and Wealth Planning

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Question 21

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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) Natalie has made a complete gift of $500,000.
B) Natalie has made a taxable gift of $1,000.
C) Natalie has not made a complete gift because the trust is revocable.
D) Natalie has made a taxable gift of $16,000.
E) None of the choices are correct.

F) A) and E)
G) A) and B)

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Question 22

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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 factors are utilized in the calculation of the value of a life estate in a trust.

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

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Question 23

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Jayden gave Olivia a ring when she agreed to marry him. The ring is a family heirloom valued at $34,750. What is the amount of the taxable gift?

A bypass provision in a will requires a decedent to have a taxable estate in order to use an applicable credit to reduce total estate taxes on a married couple.

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

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

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?

Andrew and Brianna are married and live in Texas, a community-property state. For their birthdays this year Andrew gave cash gifts of $23,300 to each of his two daughters, and Brianna gave $38,400 to her niece. What is the amount of Andrew's taxable gifts?

Only complete gifts are subject to the federal gift tax.

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

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?

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.

At her death Serena owned real estate worth $216,750 with her spouse in joint tenancy with the right of survivorship. Serena contributed $72,250 to the original cost of the property and her spouse contributed the remaining $144,500. What amount, if any, is included in Serena's gross estate?

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

The exemption equivalent was repealed in 2010.

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

Both spouses must consent to any gift-splitting election.

The estate and gift taxes share several common features. Which of the following characteristics is common to both the estate and gift taxes?

The tax on cumulative taxable gifts is reduced by the applicable credit regardless of whether any applicable credit was used in prior years.

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.