CHAPTER 5 - ESTATE AND GIFT TAX BASICS

Question 1

WHAT DOES THE PORTABILITY RULE ALLOW

Answer 1

UNUSED SPOUSE’S UNIFIED CREDIT CAN BE CARRIED OVER TO LIVING SPOUSE’S ESTATE IF AN ESTATE TAX RETURN IS FILED THAT REQUESTS THE TRANSFER

Question 2

A TRANSFER OF PROPERTY FOR LESS THAN FULL AND ADEQUATE CONSIDERATION IN MONEY OR MONEY’S WORTH

Answer 2

GIFT

Question 3

D SELLS HER HOUSE TO HER SON FOR $100,000 WHEN THE FMV OF THE HOUSE IS $150,000. WHAT IS THE GIFT

Answer 3

50 - 14 = 36

Question 4

WHAT IS THE DIFFERENCE BETWEEN GIFT AND BUSINESS TRANSACTION

Answer 4

DONATIVE INTENT

Question 5

HOW IS GIFTED PROPERTY VALUED

Answer 5

HIGHEST AND BEST USE AT DATE OF GIFT

Question 6

WHAT IS THE VALUE OF THE GIFT TAX EXCLUSION IN ESTATE TAX PLANNING

Answer 6

ALLOWS THE TAXPAYER TO REMOVE SIGNIFICANT ASSETS FROM HIS OR HER GORSS ESTATE

Question 7

WHAT IS A REQUIREMENT OF THE USAGE OF THE GIFT TAX EXCLUSION

Answer 7

THE TRANSFERRED PROPERTY MUST BE A PRESENT INTEREST, NOT A FUTURE INTEREST

Question 8

WHAT IS THE BENEFIT OF A CRUMMEY TRUST

Answer 8

ALLOWS THE BENEFICIARY TO WITHDRAW FROM THE TRUST FOR A CERTAIN PERIOD OF TIME BEFORE BEING SEALED

QUALIFIES FOR ANNUAL EXCLUSION

Question 9

WHAT IS THE REQUIREMENT TO ALLOW FOR UNLIMITED GIFT TRANSFERS FOR EDUCATIONAL AND MEDICAL EXPENSES

Answer 9

THE GIFTS MUST BE PAID DIRECTLY TO THE EDUCATIONAL OR MEDICAL SERVICE PROVIDER

THE RELATIONSHIP DOESN’T MATTER

Question 10

WHAT IS ONE LIMIT OF THE MARITAL DEDUCTION FOR GIFTS

Answer 10

THERE CAN NOT BE A TERMINABLE INTEREST, SUCH AS DIVORCE

Question 11

WHAT IS THE GENERAL RULE FOR GROSS ESTATE INCLUSION

Answer 11

IF THE PROPERTY IS TRANSFERRABLE AT DEATH, IT IS INCLUDED

INTEREST CAN USUALLY BE EXCLUDED BECAUSE THEY ARE NONTRANSFERABLE

Question 12

HOW IS JOINT TENANCY PROPERTY HANDLED WITH REGARDS TO THE GROSS ESTATE

Answer 12

THE PROPERTY IS INCLUDED IN THE DECEDENT’S ESTATE UNLESS THE SURVIVING JOINT TNENAT CAN PROVE CONTRIBUTION

Question 13

HOW IS JOINT TENANCY PROPERTY HANDLED IF THE TENANTS ARE MARRIED

Answer 13

ONLY HALF OF THE JOINT PROPERTY IS INCLUDED IN GROSS ESTATE REGARDLESS OF CONTRIBUTION

Question 14

HOW IS LIFE INSURANCE TREATED FOR THE GROSS ESTATE

Answer 14

THE POLICY IS USUALLY INCLUDED IF:

THE POLICY IS PAYBLE TO THE ESTATE OR BENEFIT OF THE INSURED’S ESTATE

THE INSURED POSSESSED OWNERSHIP AT TIME OF DEATH

Question 15

WHAT HAPPENS IF THE LIFE INSURANCE POLICY IS TRANSFERRED WITHIN 3 YEARS OF DEATH

Answer 15

THE FACE AMOUNT OF THE POLICY IS INCLUDED IN THE DECEDENTS GROSS ESTATE

Question 16

HOW ARE IRA AND OTHER RETIREMENT BENEFITS TREATED FOR THE GROSS ESTATE

Answer 16

THE BENEFITS ARE INCLUDED IN THE DECEDENT’S GROSS ESTATE

Question 17

WHAT ARE THE GENERAL, ASCERTAINABLE, AND SPECIAL POWERS OF APPOINTMENT

Answer 17

GENERAL - HAPPINESS (INCLUDED)
ASCERTAINABLE - HEMS (NOT INCLUDED)
SPECIAL - CAN NOT BENEFIT (NOT INCLUDED)

Question 18

WHAT INTERESTS ARE CONDIDERED TO HAVE A STRING

Answer 18

1 - LIFE ESTATE OR RIGHT TO INCOME
2 - REVERSIONARY INTERESTS
3 - POWER TO REVOKE, ALTER, AMEND, OR TERMINATE GIFT

Question 19

D TRANSFERRED HIS HOME TO HIS CHILD AND RETAINED THE RIGHT TO LIVE IN THE HOUSE FOR LIFE. HOW MUCH IS INCLUDED IN D’S GROSS ESTATE

Answer 19

FMV OF HOME

Question 20

WHAT IS A REVERSIONARY INTEREST

Answer 20

1 - POSSESSION OR ENJOYMENT BY ANOTHER CAN ONLY BE OBTAINED BY SURVIVING THE DECEDENT
2 - THE DECEDENT RETAINED A POSSIBILITY THAT THE PROPERTY WOULD REVERT TO HIM
3 - VALUE OF REVERSIONARY INTEREST EXCEEDS 5% OF ENTIRE PROPERTY

Question 21

WHEN CAN THE ALTERNATE VALUATION DATE BE USED

Answer 21

ELECTION REDUCES THE VALUE OF THE GROSS ESTATE AND ESTATE TAXES

6 MOS AFTER THE DOD IF NO PROPERTY IS DIST

IF PROPERTY IS DIST, ITS THE DIST DATE

Question 22

WHAT IS THE TERMINABLE TRUST RULE

Answer 22

MARITAL DEDUCTION IS NOT AVAILABLE FOR INTERESTS THAT TERMINATE OR FAIL UPON THE LAPSE OF TIME OR THE OCCURRENCE OF AN EVENT

Question 23

WHAT ARE THE GIFT BASIS CALCULATIONS (GAIN, LOSS, DEPR)

Answer 23

GAIN = DONOR'S BASIS
LOSS = LESSER OF DONOR OR FMV
DEPR = DONOR'S BASIS