Estate

Question 1

EST. 2.2 Why would an insurance policy owned by the spouse or a single life annuity not be included in the owners gross estate?

Answer 1

Insurance policy has no incident of ownership and the single life annuity has no value once he dies.

Question 2

Est 2.2 What is included in the 3 year rule?

Answer 2

1. Certain transfer of life insurance by the insured
2. Any gift tax paid out of pocket on gifts.

Property or cash gifted is not subject to the 3 year look back

Question 3

EST. 2.5 which of the following items is/are deductible from Fred’s adjusted gross estate to arrive at a taxable estate?
Property held by the entirety, an insurance policy on Fred’s life naming his wife as been, a bequest of 50k to Fred’s Alma mater, a bequest of 10k to Fred’s favorite club.multiple answers

Answer 3

1,2,3
Property held by entirety transfer to spouse, insurance policy must be assumed be owned by Fred.

Question 4

EST 2.7 Can a gift tax exemption be used after the client passes?

Answer 4

No, gifting can only be done by living ppl. Therefore the gift tax exemption would t apply.

Question 5

Ret. 2-14 Which one would be included in the clients gross estate for federal estate tax purposes? Taxable gifts, A general power of appointment?

Answer 5

A general power of appointment.
Taxable gifts are added to the taxable estate.

Question 6

EST. 3.2 What are the exceptions to future interests?

Answer 6

1. Gifts in trust of future interests on behalf of minors
2. 2503c trusts
3. Crummy trusts
4. 529 plans

Question 7

EST. 3.3 What is the super annual gift tax exclusion for non US citizen spouse?

Answer 7

185,000

Question 8

EST. 3.3 Client gifts stock 218k to daughter. Basis is 20k. What is the taxable gift?

Answer 8

200k.
218- 18k (annual exclusion)

Question 9

EST. 3.6 client bought stock for 1,017,000. Stock increased to 200k, but by the time it was gifted to the son, the stock FMV was 1,017,000. Client paid 400k in gift tax. What’s the son’s basis?

Answer 9

1,017,000
No appreciation so you can’t use gift tax paid to increase basis.

Question 10

EST. 3-6 What are 5 important rules regarding taxable gifts and estate tax?

Answer 10

1. Adjustable taxable gifts exceeds the annual exclusion of 18k that applied in the year of the gift.
2. Adjustable taxable gifts are added to the taxable estate
3. Gift tax paid (or payable) are generally allowed as a credit against the tentative estate tax
4. Gift taxes paid on any gifts within three years of death are added to the gross estate
5. Gift tax exemption is 13,610,000

Question 11

EST. 3.7 When must a form 709 be filed?

Answer 11

When more than 18k is donated to any non spouse donee, a gift of future interest in any amount, a gift for which a spouses elect gift splitting

Question 12

EST. 3-12 Lucy AGI 200k gifts her Universal life policy to a public charity. Face value is 500k, cash value is 80k, and the basis is 50k. What amount is charitable income tax deduction that Lucy can claim?

Answer 12

50k
Note: this is not a LTCG type that can be value at FMV for charitable income tax deduction purposes. Must use the lesser of FMV or basis.

Question 13

EST. 5.1 In the inter vivos trust, the () holds legal title, and the () have/has equitable title.

Answer 13

Trustee, Beneficiaries

Question 14

What should I do with highly appreciated property?

Answer 14

Good to gift to a charity or donee in a lower tax bracket. Or hold on til death to get stepped up cost basis.

Question 15

What should I do with property likely to appreciate?

Answer 15

Good to gift to remove future growth from donors estate

Question 16

What should I do with income producing property?

Answer 16

Gift to donee in a lower tax bracket

Question 17

What should I do with loss property?

Answer 17

Sell to take the loss and then gift the proceeds

Question 18

What should I do with out of state property?

Answer 18

Gift to avoid ancillary probate

Question 19

What should I do with property subject to depreciation?

Answer 19

Keep property until fully depreciated.

Question 20

What should I do with fully depreciated property?

Answer 20

Great for gift leaseback technique

Question 21

What should I do with life insurance?

Answer 21

Excellent to gift- value at replacement value but “blossoms” to face value

Question 22

Rev 1-2 Ten years ago, Adam and Gloria Adams, married, bought a home together in a community prop state, for 50k. Sam died four years ago when the home was worth 300k. Gloria continued to live in the home for 4 years and now sold it for 750k. What amount of cap gain must she recognize?

Answer 22

200k

Question 23

Clients live in Community prop state for all their married and working lives. Their assets
1. 1 mill in stock
400k real estate in her name with her inheritance
500k home
50k Lexus in her name purchased with gifts from her mother.
2 Savings accounts: 30k in her name, and 60k in his name.

What assets get a full step up in basis?

Answer 23

All LTCG prop
Stock, real estate, and the home

Question 24

Rev 8-1 Luke, died, married, owning the following assets:
1. 50 acres of land with a fair market value of 100k. The land, 100k was owned with his brother TIC. 50/50
2. 100k of life insurance on his life with a cash value of 30k payable to his estate
3. A home worth 1 mill owned JT with his wife
4. 12 mill of investments owned TBE with his wife
5. A business worth 5 mill
6 taxable gifts of 15,610,000 this year
7. Gift taxes paid this year of 800k
What is the dollar amount of his probate estate?

Answer 24

5,150,000

Question 25

Rev 10-1 Client owned a life policy and changed the ownership of the policy to his son. Right after changing ownership he died. If he wasn’t the insured, would the policy get brought back into his estate?

Answer 25

No. He is not the insured so the 3 year rule doesn’t apply.

Question 26

Rev 14-1 your aunt purchases property for 2,018,000. Four years later, when the property values have declined, she gifts it to you for 1,518,000 paying 600k in gift taxes (already used full exemption). If you sell the property 2 years later for 1,418,000, what is the amount of the taxable gift?

Answer 26

1,500,000

Question 27

Rev 17-1 this year, Frank gave his daughter a Lexus worth $45,000, his son a Corvette worth $43,000 and his wife a Mercedes worth $80,000. His wife gave $36,000 to their daughter and $36,000 to their son. In addition, Frank gave $100,000 to Purdue university, and he gave his brother a remainder interest in a ranch worth $138,000. What is the amount of Frank’s total taxable gifts for the current year?

Answer 27

190k

Question 28

Rev 20-2 when does a trustee become a fiduciary?

Answer 28

When the trustee controls the assets.

Question 29

Rev 26-1 vern and Laurie Maxwell have been married parentheses second marriages for both and parentheses for 10 years and own the following assets: vern has $5 million in the ABC mutual fund in his name (gift). Vern also has $5 million of stock in his name from an inheritance. Vernon Lori also have 13,220,000 in community property to maximize their estate tax savings at Vern’s death in 2024. What do you recommend Vern transfer?

Answer 29

Zero to trust A
13,610,000 to trust B
3 mill to trust c

Question 30

Rev 26-2 Client wants the QTIP trust property to pass to his grandchildren, rather than his children, at wife’s death. How should the QTIP be structured?

Answer 30

With a reverse QTIP

Question 31

Rev 27-4 Which of the following investments would you recommend go into a Bypass trust that is not distributing income now?
1. High yield bonds
2. Convertible Bonds
3. Mortgage Reits
4. Public purpose municipal

Answer 31

Public purpose munis
Accumulating trust interest has a 37% tax

Question 32

Rev 27-1 dr. Betsy Ross, a US citizen, is married to Toronto Tom, a Canadian citizen living in the United States. She has a gross estate of $15,610,000 if she dies in 2024 and no QDT is in place, what will be the taxable estate? If Betsy dies first and the 15,610,000 is held in joint tenancy with Tom, how will it be included in her gross estate?

Answer 32

15,610,000
All of it will be included until Tom can prove he contributed.

Question 33

Rev 43 when Ricky Bobby dies all of the assets he owns our long-term investments. He leaves $2 million to his children with a basis of $1 million and $12 million to his wife with the basis of $9 million. His estate date of death value is $14 million and the six month alternative valuation is $16 million. What is the income tax basis of the investments if his family sells the assets?

Answer 33

14 mill. He doesn’t have estate tax so he can choose AVD

Question 34

Rev 47 mr. Wes age 70 single owns land in Montana by Montana. Standards is small piece of land recently he allowed drilling on the land and it was a success. The land before fracking was only worth $1 million but now it may be worth $10 million he wants to reduce his estate and income tax exposure. It is estimated that the wells could produce for up to 20 or more years by limiting the output. Mr. West is worried because he has high blood pressure and is overweight given his situation and objectives, which of the following strategies would you recommend?
A. Give the land to the University of Montana.
B elect 2032 capital a special use valuation
C elect a death to use 6166 election
D established a 20 year GRAT with family members as beneficiaries
E establish A FLP and gift partnership unit at a discount to family members

Answer 34

E.

Question 35

Extra 1 and 3 mr. and Mrs. Adams lived in a community property state for all their married, working lives. These are their assets. $2 million in stock. $600,000 of mutual funds in his name purchased with his inheritance. $1 million home with $150,000 of personal property. $50,000 boat in his name purchased with his earnings from his inheritance. Two savings accounts $50,000 in her name and $100,000 in his name.How much will Mr. Adams probate state be? How much is included in Mr. Adam’s gross state?

Answer 35

2.3 mill and 2.3 mill

Question 36

Extra 17 Johnny sets up an irrevocable trust for his mother. She is the only beneficiary of the trust provides that his mother will receive a $1000 of monthly income. The annual trust income is approximately $18,000 but can vary Johnny is the remainder beneficiary at his mother‘s death to whom is the trust income taxable?

Answer 36

Johnny

Question 37

Rev 8. What’s the probable estate for client married. Owned the following. What’s the gross estate?
1. 50 acres of land, FMV 100k. Owned with brother 50/50 TIC
2. 100k of life insurance on his life with cash value of 30k payable to his estate.
3. A Home worth 1 mill owned JT with his wife.
4. 12 mill assets owned TBE with wife
5. Business worth 5 mil
6. Taxable gifts of 15.6 mill this year
7. Gift taxes paid this year 800k

Answer 37

5,150,000
12,450,000