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Exam 27: The Federal Gift and Estate Taxes

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Question 21

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Murray owns an insurance policy on the life of his father,Ethan.Upon Ethan's death,the policy proceeds of $2,000,000 are paid to the designated beneficiary,Grace.What are the tax consequences resulting from Ethan's death based on the following assumptions?

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Question 22

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The Federal gift and estate taxes were restructured in 1976 into the unified transfer tax.The objective of the change was to eliminate the tax difference between transfers during life (gift tax)and at death (estate tax).Does this uniformity of treatment currently exist? In this regard,comment on the following differences between the two taxes.

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Question 23

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Which,if any,of the following is a correct statement regarding the filing of a gift tax return (Form 709) ?

A few states impose both an estate tax and an inheritance tax.

Cliff loans his adult daughter,Stella,a large sum of money to enable her to start her own business.The loan is evidenced by a note,and no interest is provided for or repayment date specified.What are the potential tax ramifications of this arrangement to Cliff and Stella?

Don and Roxana are husband and wife and live in a common law state.Pursuant to the estate tax rules applicable to annuities (§ 2039) ,which of the following is not a correct statement?

Becky made taxable gifts in 1974,2010,and 2011.In computing the gift tax on the 2011 gift,she must consider all of the prior taxable gifts.

In 2010 and with $100,000,Ronald establishes a joint savings account with his cousin,Allison.In 2011,Allison withdraws the $100,000 and disappears.Ronald made a gift to Allison in 2011.

What is the justification for the terminable interest rule that is applicable to the marital deduction?

In what manner does the tax law favor contributions to qualified tuition plans under § 529?

The purpose of the marital deduction is to place married decedents in common law states on par with those in community property jurisdictions.

The current $5 million exemption equivalent is not permanent but is scheduled to expire after 2012.

Under his grandfather's will,Tad is entitled to receive shares of Kroger Corporation.For Federal tax purposes,Tad is allowed to disclaim some of these shares and accept the others.

At the time of her death,Rita held a promissory note from a loan she had made to her son.Even if Rita's will forgives the loan,the note is included in her gross estate.

Tom and Jean are husband and wife and live in California.In 1991,they use $400,000 of community funds to purchase an annuity from an insurance company.Under the terms of the contract,Tom is to receive $40,000 per year for life once he reaches age 65.If Jean outlives Tom,she is to receive $30,000 per year for life.Tom dies first in 2011 (and before reaching age 65) .At this time,the value of Jean's interest is $500,000.As to this contract,Tom's gross estate includes:

At the time of Dylan's death,he was a resident of Newark.He owns land located in a foreign country,which is subject to that country's death tax.This same land also can be subject to the Federal estate tax.

The current Federal transfer tax rate of 35% is as low as any top rate that ever has been imposed.

Which,if any,of the following is not a characteristic of the Federal estate tax?

At the time of her death in an automobile accident,Laura left a modest probate estate,most of which she had inherited from her mother several years ago.Comment on Laura's Federal estate tax position in connection with each of the following points.

Georgia owns an insurance policy on the life of Jake,with Scarlet as the designated beneficiary.Upon Scarlet's prior death,no transfer tax consequences result.