Estate and Gift Tax

Question 1

Under the unified rate schedule,
A. Lifetime taxable gifts are taxed on a noncumulative basis.
B. Transfers at death are taxed on a noncumulative basis.
C. Lifetime taxable gifts and transfers at death are taxed on a cumulative basis.
D. The gift tax rates are 5% higher than the estate tax rates.

Answer 1

C - Under the unified rate schedule, lifetime taxable gifts and transfers at death are taxed on a cumulative basis through reducing the amount of the unified credit by the sum of all amounts credited in preceding periods.

Question 2

George and Suzanne have been married for 40 years. Suzanne inherited $1,000,000 from her mother. Assume that the annual gift-tax exclusion is $14,000. What amount of the $1,000,000 can Suzanne give to George without incurring a gift-tax liability?
	A.  	$14,000
	B.  	$28,000
	C.  	$500,000
	D.  	$1,000,000

Answer 2

D - An unlimited exclusion from the gift tax applies for gifts to spouses. Therefore, Suzanne can give the entire $1,000,000 to George and pay no gift tax.

Question 3

What types of gifts are always taxable (aka the gift tax exclusion does not apply)

Answer 3

Political contributions, and trusts w/ future interest

Question 4

Ordinary and necessary administration expenses of an estate are deductible:
A. Only on the fiduciary income tax return.
B. Only on the estate tax return.
C. On the fiduciary income tax return if the estate tax deduction is waived.
D. On both the fiduciary income tax return and the estate tax return.

Answer 4

C - Ordinary and necessary administration expenses of an estate are deductible on the fiduciary income tax return if the administrator of the estate waives the deduction on the estate tax return

Question 5

Within how many months after the date of a decedent's death is the federal estate tax return (Form 706) due if no extension of time for filing is granted?
	A.  	9
	B.  	6
	C.  	4 1/2
	D.  	3 1/2

Answer 5

A

Question 6

Under which of the following circumstances is trust property with an independent trustee includible in the grantor’s gross estate?
A. The trust is revocable.
B. The trust is established for a minor.
C. The trustee has the power to distribute trust income.
D. The income beneficiary disclaims the property, which then passes to the remainderman, the grantor’s friend.

Answer 6

A - In general, once a trust is established and the taxpayer has transferred property to the trust, this property will not be included in the taxpayer’s gross estate at death unless the taxpayer maintains ownership or control of the property. Since this trust can be revoked, the taxpayer still controls the property so at death the property will be included in his gross estate. Other conditions listed in the problem (trust for a minor, independent trustee can distribute income, disclaimer) do not cause the taxpayer to retain ownership in the property.

Question 7

Which of the following credits may be offset against the gross estate tax to determine the net estate tax of a U.S. citizen?

1. Unified credit
2. Credit for gift taxes paid on gifts made after 1976

Answer 7

1 only - Certain credits may be offset against the gross estate tax to determine the net estate tax of a U.S. citizen. These credits are the unified credit, foreign death taxes, prior transfers and gift taxes paid on pre-1977 gifts.

Question 8

The federal estate tax may not be reduced by a credit of
A. Foreign death taxes.
B. Credit for estate tax paid on a prior transfer of the same property within ten years of the death of the decedent.
C. Gift taxes paid on pre-1977 gifts.
D. State death taxes paid.

Answer 8

D

Question 9

When a person dies - what types of payments are deductible from gross estate to arrive at taxable estate?

Answer 9

executor fees, charitable donations called for in the will, funeral expenses