Estates, Trusts, & Wealth Transfers

Question 1

WHAT are includible item(s) in a Gross Estate of a deceased family member?

Answer 1

• Cash
• Securities (i.e. Stock); and
• Other investments

Note: FMV of all property, real or personal, tangible or intangible, wherever situated, to the extent the decedent owned a beneficial interest at the time of death.

Question 2

TRUE or False.

Qualified spouses may transfer up to $30,000 to any one person without gift tax liability.

Answer 2

TRUE.

Each spouse is allowed to apply their $15,000 annual gift exclusion towards the gift for a total exclusion of $30,000 per donee

Note: Both spouses must consent to the use of gift splitting

Question 3

True or False.

Charitable contributions are a CREDIT from the gross estate

Answer 3

FALSE.

The charitable contribution are a DEDUCTION from the gross estate, not a credit against the estate tax liability

Question 4

True or False.

A trust remainder is the only gift subject to exclusion from taxable gifts

Answer 4

FALSE.

THE trust remainder is the only gift NOT subject to the exclusion

i.e. because it is of a future interest

Question 5

True or False.

Tuition payments made on behalf of another individual are NOT excludible for gift tax purposes

Answer 5

FALSE.

Tuition payments made on behalf of another individual are excludible for gift tax purposes

Question 6

WHAT type of entity is entitled to the net operating loss deduction?

Answer 6

Trusts and Estates

Question 7

WHEN is Form 709 required to be filed?

Answer 7

(1) WHEN spouses agree to file split gifts
(2) Any gifts made are of a future interest
(3) Donor gives more than $15,000 during the year to any one donee

Question 8

WHEN is a gift NOT a transfer that comes within the gift tax statutes?

Answer 8

WHEN the transfer is revocable without the consent of the other parties

i.e. IT is NOT complete and not taxable

Question 9

WHAT entity is required to file Form 709, United States Gift Tax Return?

Answer 9

Individual Taxpayers

i.e. The only “entity” required to file Form 709 is an individual taxpayer

Question 10

True or False.

Carryforwards are allowed for unused losses and deductions on the death of a taxpayer.

Answer 10

FALSE.

Carryforwards of unused losses and deductions are NOT allowed

Question 11

WHAT are some items that may be claimed as deductions against a decedent’s estate?

Answer 11

(1) Executor’s fees
(2) Charitable bequests
(3) Legal fees to settle an estate

Question 12

WHAT is an estate’s basis in land received upon death of the taxpayer?

Answer 12

ITS fair market value at the date of death

Question 13

WHEN can the alternate valuation date be elected for Federal Estate Tax purposes?

Answer 13

Only if its use (decreases) both the value of the gross estate; and

the sum of the estate tax and the generation-skipping transfer tax

Note: This is reduced by any allowable credits

Question 14

What threshold amount would require an executor to file a federal estate tax return (i.e. Form 706) for the decedent?

Answer 14

$11.18 Million

i.e. The executor is required to file Form 706, United States Estate Tax Return, if the gross estate at the decedent’s death exceeds $11.18 million

Question 15

WHEN is a charitable contribution deduction allowable on an estate’s fiduciary income tax return?

Answer 15

ONLY if the the decedent’s will specifically provides for the contribution

i.e. they are deductible only to the extent the WILL specifically provides for the contribution

Question 16

WHAT is the rule surrounding deductibility of Attorney, Accountant, and Executor fees for estate tax purposes?

Answer 16

THEY may be deducted if a waiver is not filed

i.e. A statement must be filed that such amounts have not been allowed as deductions under Sec. 2053 and the right to deduct such amounts under Sec. 2053 is waived

Question 17

True or False.

Medical expenses incurred by a decedent are deductible on their final income tax return if they are paid within 3 years after the date of death

Answer 17

FALSE.

Medical expenses incurred by a decedent are deductible on their final income tax return if they are paid within (1) year after the date of death

Question 18

WHEN is a gift tax return due for a year of death?

Answer 18

NOT later than the estate tax return due date

Question 19

HOW is the imputed interest charged on a gift loan between related parties treated?

Answer 19

As a gift each year the loan is outstanding

i.e. The lender is treated as having made a gift of the imputed interest to the borrower each year the loan is outstanding (interest is taxable)

Question 20

WHEN is an Estate Tax Return due assuming that a request for an extension of time is not filed?

Answer 20

BY the 9 months after the date of death of the decedent

E.g. Descendent died on March 15th - Return due December 15th

Question 21

WHAT is your “distribution deduction” equal to?

Answer 21

THE lesser of:

(1) the required distribution - (which includes the components of interest + dividend + exempt interest)
(2) the distributable net income (DNI)