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Exam 27: The Federal Gift and Estate Taxes

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Question 71

True/False

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As a result of a fatal auto accident,Irene totaled a Bentley worth $95,000.If the insurance company covers $60,000 of the loss,Irene's estate can claim a deduction of $35,000 in arriving at the taxable estate.

A) True
B) False

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Question 72

Multiple Choice

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

A) A foreign tax credit is available.
B) Pre-1977 taxable gifts need to be considered.
C) The generation-skipping transfer tax may also apply.
D) A credit for tax on prior transfers may be available.
E) A charitable deduction is available.

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

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Question 73

Multiple Choice

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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 a correct statement?

A gift between spouses that does not qualify for the marital deduction will require the filing of a Federal gift tax return (Form 709).

Jordan owns an insurance policy on the life of his father,Milton.Upon Milton's death,the policy proceeds of $1,000,000 are paid to the designated beneficiary,Kinsey.What are the tax consequences resulting from Milton's death based on the following assumptions?

At the time of his death,Lance held a life estate in the LM Trust.Under which of the following circumstances will the LM Trust not be included in his gross estate?

If interest is provided for in loans between related parties,there is no imputed interest,as a gift loan does not result.

The same charitable organizations that qualify for income tax purposes qualify for estate tax purposes.

Community property law has been influential in the enactment of several provisions of the Federal estate and gift tax.In this regard,comment on the following.

Before his nephew (Dean) leaves for college,Will loans him $400,000.Dean signs a note promising to repay the loan in five years.No interest element is provided.Which,if any,of the following is not a tax consequence of this arrangement?

Michael and Addison are married and have a 9-year old grandson,Braydon.They want to contribute to a § 529 plan on behalf of Braydon's education.For 2009,what is the maximum amount they can transfer to the plan without making a taxable gift?

Kim,a resident and citizen of Korea,dies during an operation at the Mayo Clinic in Rochester (MN).Just because Kim died in the U.S. ,he will not be subject to the Federal estate tax.

Rachel owns an insurance policy on the life of Albert with Belle as the designated beneficiary.Upon Rachel's prior death,nothing regarding this policy is included in her gross estate.

A Federal gift tax return need not be filed if no gift tax is payable.

Homer and Laura are husband and wife.At the time of Homer's prior death in 2009,they owned the following: land as tenants by the entirety worth $2,000,000 (purchased by Homer) and stock as equal tenants in common worth $3,000,000 (purchased by Laura) .Laura also owns an insurance policy on Homer's life (maturity value of $1,000,000) with herself as the designated beneficiary.Homer's will passes all his property to Laura.How much marital deduction is allowed Homer's estate?

In which of the following situations is Margie's property ownership interest not lost by her prior death?

A lifetime transfer that is supported by full and adequate consideration is not a gift.

In 2000,Murray and Pearl acquire real estate for $900,000,with Murray furnishing $300,000 of the purchase price and Pearl providing the balance.Title to the property is listed as: "Murray and Pearl,equal tenants in common." Murray dies first in 2009,when the real estate is worth $3,000,000.

Dustin and Penny are husband and wife and always have lived in Washington.At the time of Dustin's prior death in 2009,he was insured in the amount of $600,000 with Penny as the designated beneficiary.The policy was taken out by Dustin before marriage and the premiums thereon were paid as follows: 30% prior to marriage from Dustin's separate property and 70% after marriage from community funds.As to this policy,Dustin's gross estate includes:

Doyle died in 2000 and by will created a trust with the following provisions: "life estate to my wife,Grace,remainder upon her death to our children." Grace dies in 2009.Is the trust Doyle created included in Grace's gross estate? Explain.