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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 among them. What is the amount of the taxable gifts, if any, made by Christian?


A) $60,000.
B) $46,000.
C) $34,000.
D) $18,000.
E) None of the choices are correct-the amount of the taxable gifts cannot be ascertained without valuing each income interest.

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

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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 $235,000 taxable gift.
C) Anthony has not yet made a complete gift.
D) Anthony has made a complete gift of the income interest only.
E) None of the choices are true.

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

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Gabriel had a taxable estate of $16 million when he died in 2020. Calculate the amount of estate tax due (if any) if Gabriel made prior taxable gifts in 2005 totaling $1 million, at which time he claimed an applicable credit of $1 million and paid no tax. Gabriel was unmarried at his death. (Use Exhibit 14-1.)

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$2,168,000...

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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 the choices are true.

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

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A gift tax return does not need to be filed unless the taxpayer has made current gifts in excess of the applicable credit.

A) True
B) False

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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 the choices are correct.

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

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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 applicable 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 the choices are true.

F) C) and D)
G) B) and E)

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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 21 st birthday. What is the amount of the taxable gift?


A) $90,000.
B) $75,000.
C) $64,000.
D) zero-there is no complete gift until the trustee makes a distribution from the trust.
E) None of the choices are correct.

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

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The probate estate consists of all property owned by the decedent that is excluded from the gross estate.

A) True
B) False

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The testamentary transfer of property to a qualified charity is deductible in calculating the taxable estate without any ceiling limitation.

A) True
B) False

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Tracey is unmarried and owns $17 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 the choices are correct.

F) None of the above
G) B) and E)

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This year Alex's friend Kimberly was disabled. Alex paid $30,000 to Kimberly's doctor for medical expenses. In addition, Alex also paid $25,000 to Kimberly directly so that her son could afford tuition at State University this year. Has Alex made taxable gifts, and if so, in what amounts?

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The payment to Kimberly was a taxable gi...

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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.

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

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A trust is a legal entity whose purpose is to hold and administer property for the benefit of beneficiaries.

A) True
B) False

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The annual exclusion applies to cumulative gifts made to each donee over the course of the year.

A) True
B) False

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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 $34,000 to her niece. What is the amount of Andrew's taxable gifts?


A) $2,000.
B) $10,000.
C) $25,000.
D) zero only if Andrew and Brianna elect to split gifts.
E) None of the choices are correct.

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

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Which of the following transfers is a complete 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 the choices is a complete gift.

F) C) and D)
G) D) and E)

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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 the choices are true.

F) A) and D)
G) C) and E)

Correct Answer

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Which of the following is a true statement about the federal gift tax return (Form 709) ?


A) Form 709 is due by the 15 th 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 the choices are true.

F) B) and D)
G) B) and E)

Correct Answer

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At his death in 2020, Nathan owned the following property: At his death in 2020, Nathan owned the following property: The real estate is subject to a $1,700,000 mortgage and Nathan made taxable gifts in 2009 totaling $2 million, at which time he offset the gift tax with an applicable credit (exemption equivalent of $2 million). Nathan has never been married. What is the amount of his estate tax due? (Use Exhibit 14-1.) The real estate is subject to a $1,700,000 mortgage and Nathan made taxable gifts in 2009 totaling $2 million, at which time he offset the gift tax with an applicable credit (exemption equivalent of $2 million). Nathan has never been married. What is the amount of his estate tax due? (Use Exhibit 14-1.)

Correct Answer

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$1.768 million in 2020.
Nathan...

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