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Exam 18: The Federal Gift and Estate Taxes

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Question 21

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At the time of her death, Emma still owed $36,000 on her church pledge for the year. Because church pledges are not an enforceable obligation in the state where Emma resided, her estate cannot claim a deduction for the $36,000 that it owes and later pays.

A) True
B) False

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Question 22

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Match each statement with the correct choice. Some choices may be used more than once or not at all. -Federal gift tax

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) Overrides the terminable interest rule of the marital deduction.
J) Exemption equivalent.
K) Bypass amount.
L) No correct match provided.

M) F) and H)
N) B) and H)

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Question 23

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At the time of her death, Sophia was a participant in her employer's qualified pension plan. Her accrued balance in the plan is as follows. $\begin{array}{lr}\text { Employer's contribution } & \$ 1,300,000 \\\text { Sophia's contribution } & 800,000 \\\text { Income earned by plan } & 900,000\end{array}$ Sophia also was covered by her employer's group term life insurance program. Her policy maturity value of $100,000) is made payable to Aiden Sophia's husband). Aiden also is the designated beneficiary of the pension plan. a. Regarding these assets, how much is included in Sophia's gross estate? b. In Sophia's taxable estate? c. How much gross income must Aiden recognize, when collecting on these items?

Classify each of the following independent statements:. -Proceeds of an insurance policy on decedent's life. Decedent's son purchased the policy and is its owner and beneficiary.

A father wants to give a parcel of land to his two children. If he wants the survivor to have sole ownership, he should list ownership of the property as joint tenants.

In determining whether a dividend issued on stock held by a decedent is included in the gross estate, the record date rather than the declaration or payment dates) controls.

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

Paul, a U.S. citizen, will avoid the Federal estate tax if he becomes a Canadian resident and owns no property located in the United States at the time of his death.

Walt dies intestate i.e., without a will) in the current year with a gross estate valued at $4,000,000. Under applicable state law, Walt's property passes to Kelly and to Belle in that order. Kelly has an estimated net worth of $3,000,000 while Belle's is zero. From a tax planning standpoint, what course of action might be advisable?

Sidney dies and leaves property to his sister Giselle. Thirteen months later, Giselle dies. Giselle's estate can claim a full credit for any Federal estate taxes paid by Sidney's estate as to amounts passing to Giselle.

For both the Federal gift and estate taxes, a deduction is allowed for certain transfers to a spouse.

At the time of her death, Amber owns property worth $5,000,000. Other information regarding her affairs is as follows. $\begin{array}{lr}\text { Unpaid pledge to the building fund of her church } & \$ 50,000 \\\text { College graduation gift she had promised her grandson } & 20,000 \\\text { Local property taxes owed (accrued prior to death) } & 100,000 \\\text { Mortgage owed on personal residence } & 800,000\end{array}$ All of these items were paid by her estate, and none were deducted on Form 1041 income tax return of the estate). What is Amber's taxable estate?

Classify each of the following statements. -Howard establishes a trust, life estate to his children and remainder to the grandchildren. Under its terms, the trust is revocable by Howard.

Classify each statement appropriately. -Post-death property taxes paid to the county on realty included in the gross estate.

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

Calvin's will passes $800,000 of cash to his widowed sister, Muriel. The estate tax attributable to the cash is $110,000. Muriel dies five years later, and the estate tax generated by the $800,000 is $100,000. How much of a credit for tax on prior transfers will Muriel's estate be allowed?

In which of the following independent situations has Trent made a gift?

Waldo is his mother's sole heir and is the designated executor of her estate. Although the alternate valuation date would yield a smaller gross estate and less estate tax liability, the election is not made. Instead, Waldo files a Form 706 for his mother's estate using higher date of death values. Why?

Barry pays State University for his daughter's room and board. Barry has made a transfer that is subject to the Federal gift tax.

Matt and Patricia are husband and wife and live in Oregon. In 2010 and using her funds, Patricia purchased a residence for $400,000, listing title to the property as "Matt and Patricia, joint tenants with right of survivorship." In 2020, Matt dies before Patricia when the residence is worth $2 million. A correct statement as to these transactions is: