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Exam 25: Transfer Taxes and Wealth Planning of the Cfa Institute

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Question 21

True/False

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

A) True
B) False

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Question 22

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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.

A) True
B) False

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Question 23

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

Last year Diego transferred a life insurance policy worth $75,000 to an irrevocable trust with directions to distribute the corpus of the trust to his grandson, Juan, upon his graduation from college, or to Juan's estate upon his death. Diego paid $5,000 of gift tax on the transfer of the policy. Early this year, Diego died and the insurance company paid $600,000 to the trust. What amount, if any, is included in Diego's gross estate?

Which of the following is a completed taxable gift?

This year Nathan transferred $2 million to an irrevocable trust established for the benefit of his nephew. The trustee is directed to accumulate income for the next 5 years before distributing the trust corpus to Nathan's nephew. In past years Nathan has made taxable gifts of $6 million and used a unified credit on an exemption equivalent of $5 million. What amount of gift tax, if any, must Nathan remit?

At her death Tricia had an adjusted gross estate consisting of $8 million of property. Which of the following is a true statement about Tricia's estate or estate tax?

At his death in 2014 Nathan owned the following property: $\begin{array}{lr}\underline{\text { Description }} & {\underline{\text { Value }}} \\\text { Real estate } & \$ 5,000,000 \\\text { Cash, stock, and bonds } & 10,500,000 \\\text { Personal property } & 200,000\end{array}$ 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 a unified credit (exemption equivalent of $2 million). Nathan has never been married. What is the amount of his estate tax due?

Caleb transferred $115,000 to an irrevocable trust for Avery. The trustee has the discretion to distribute income or corpus for Avery's benefit but is required to distribute all assets to Avery (or his estate) not later than Avery's 21st birthday. What is the amount, if any, of the taxable gift?

The generation-skipping tax is designed to accomplish which of the following?

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

A couple who is married at the time of completing a gift can elect to file a joint gift tax return.

Which of the following transactions would not utilize the "Section 7520 rate" to calculate the value of the transfer?

This year Alex's friend, Kimberly, was disabled. Alex paid $25,000 to Kimberly's doctor for medical expenses. In addition, Alex also paid $15,000 to Kimberly so that her son could afford tuition at State University this year. Has Alex made taxable gifts, and if so, in what amounts?

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

The gift tax is imposed on inter vivos (lifetime) transfers.

This year Maria transferred $600,000 to an irrevocable trust that pays equal shares of income annually to four cousins (or their estates) for the next eight years. At that time, the trust is terminated and the corpus of the trust reverts to Maria. Determine the amount, if any, of the current gifts and the taxable gifts if the relevant interest rate is 6 percent and Maria is married and elects to gift-split with her spouse.

Ryan placed $280,000 in trust with income to Stephen for his life and the remainder to Kayla (or her estate). At the time of the gift, given the prevailing interest rate, Stephen's life estate was valued at $165,000 and the remainder at $115,000. What is the amount, if any, of Ryan's taxable gifts?

The probate estate will include the total value of all real property owned by the decedent at the time of death regardless of whether the decedent co-owned the property as tenants in common or as joint tenants with the right of survivorship.

At her death Serena owned real estate worth $210,000 with her spouse in joint tenancy with the right of survivorship. Serena contributed $50,000 to the original cost of the property and her spouse contributed the remaining $100,000. What amount, if any, is included in Serena's gross estate?