Gift & Estate Tax Flashcards
What is the exclusion for tax on a gift?
$14,000
If an individual paid medical expenses on behalf of a donee, and these medical expenses were directly paid to a medical care provider, this would allow the doner ______ exclusion
An unlimited
Interest income resulting from a bond transferred to a trust will be accumulated and distributed to a child in the future. A gift of this nature is ______ (eligible/not eligible) to be offset by an annual exclusion
As the gift is a gift of a future interest, it is NOT ELIGIBLE
T/F
Medical expenses paid directly to a physician on behalf of an individual unrelated to the donor are cause for filing a gift tax return if the transfer exceeds the available annual gift tax exclusion
FALSE
There are unlimited exclusions available for this type of gift after the annual exclusion has been used
T/F
Tuition paid directly to an accredited university on behalf of an individual unrelated to the donor is cause for filing a gift tax return if the transfer exceeds the available annual gift tax exclusion
FALSE
There are unlimited exclusions available for this type of gift after the annual exclusion has been used
T/F
Payments for college books, supplies, and dormitory fees on behalf of an individual unrelated to the donor are cause for filing a gift tax return if the transfer exceeds the available annual gift tax exclusion
TRUE
T/F
Campaign expenses paid to a political organization are cause for filing a gift tax return if the transfer exceeds the available annual gift tax exclusion
FALSE
There are unlimited exclusions available for this type of gift after the annual exclusion has been used
This is the form for filing a gift tax return
Form 709
A gift tax return must be filed on a ______ basis
Calendar-Year
When is a gift tax return due?
On or before April 15th of the following year
If the donor subsequently dies, when is the gift tax return due?
Not later than the date for filing the federal estate tax return (generally 9 months after the date of death)
T/F
An unlimited marital deduction is allowed for gift tax purposes for gifts to a donee, who at the time of the gift is the donor’s spouse.
TRUE
T/F
The gift tax annual exclusion of $14,000 applies to multiple gifts to the same donee in chronological order
TRUE
An executor may elect to treat medical expenses paid by the decedent’s estate for the decedent’s medical care as paid _________. To qualify for this election, the medical expenses must be paid within _____ after the decedent’s death & the executor must ______
By the decedent at the time the medical services were provided
The one year period
Attach a waiver to the decedent’s Form 1040 indicating that the expenses will not be claimed as a deduction on the decedent’s estate tax return
If the executor of a decedent’s estate elects the alternate valuation date and none of the property included in the gross estate has been sold or distributed, the estate assets must be valued as of how many months after the decedent’s death?
6 Months
T/F
In computing the net estate tax of a US citizen, the gross estate tax may be offset by the applicable tax credit
TRUE
T/F
In computing the net estate tax of a US citizen, the gross estate tax may be offset by the credits for foreign death taxes
TRUE
T/F
In computing the net estate tax of a US citizen, the gross estate tax may be offset by prior transfer taxes
TRUE
T/F
In computing the net estate tax of a US citizen, the gross estate tax may be offset by the credit for gift taxes paid on gifts made after 1976
FALSE
Although post-1976 gift taxes reduce the net estate tax, they are not subtracted as a tax credit from the gross estate tax
The applicable tax credit is equivalent to an exemption of the first _____ of taxable gifts or taxable estate from the unified transfer tax
$5,340,000
Under the general rule for joint tenancies, ____ of the value of jointly held property is included in a deceased tenant’s gross estate except to the extent that the surviving tenants can prove that they contributed to the cost of the property
100%
Under a special rule, applicable to spouses who own property as tenants by the entirety or as joint tenants with right of survivorship, the gross estate of the first spouse to die includes ____ of the value of the jointly held property
50%
Regardless of which spouse furnished the original consideration for the purchase of the property
If an executor does not elect the alternate valuation date, all property in which the decedent possessed an ownership interest at time of death is included in the decedent’s gross estate it its ____ (FMV/Basis) at the date of death
FMV
T/F
Foreign death taxes is a valid deduction from a decedent’s gross estate
FALSE
Although foreign death taxes are not deductible in computing a decedent’s taxable estate, a limited tax credit is allowed for foreign death taxes in computing the net estate tax payable
T/F
Income tax paid on income earned and received after the decedent’s death is a valid deduction from a decedent’s gross estate
FALSE
T/F
Federal estate taxes is a valid deduction from a decedent’s gross estate
FALSE
T/F
Unpaid income taxes on income received by the decedent before death is a valid deduction from a decedent’s gross estate
TRUE
This is a liability of the estate and would be deductible from the gross estate
If a gross estate is under _____ the federal estate tax return Form ____ ____ (must be filed/does not need to be filed)
$5,340,000
Form 706
Does not need to be filed
T/F
The alternate valuation date is required to be used if the FMV of the estate’s assets has increased since the decedent’s date of death
FALSE
The alternate valuation date cannot be used if its use increases the value of the gross estate
T/F
The alternate valuation date, if elected on the first return filed for the estate, may be revoked in an amended return provided that the first return was filed on time
FALSE
The use of the alternate valuation date is an irrevocable election
T/F
The alternate valuation date must be used for valuation of the estate’s liabilities if such date is used for valuation of the estate’s assets
FALSE
The alternate valuation date is only used to value an estate’s assets, not its liabilities
T/F
The alternate valuation date can be elected only if its use decreases both the value of the gross estate and the estate tax liability
TRUE
The proceeds of life insurance on the decedent’s life are _____ (always/never) included in the decent’s gross estate
ALWAYS
T/F
The proceeds of life insurance on the decedent’s life are always included in the decent’s gross estate if they are one of the following three:
1) receivable by the estate
2) the decedent possessed any incident of ownership in the policy
3) they are receivable by another (ex, the estate’s executor) for the benefit of the estate
TRUE
This is the estate’s fiduciary income tax return
Form 1041
The federal estate tax return (Form 706) must be filed and the tax paid within ____ of the decedent’s death, unless an extension of time has been granted. However, the Fiduciary Income Tax Return (Form 1041) is due ___
9 months
On the 15th day of the fourth month following the end of the tax year.
T/F
The generation-skipping transfer tax is imposed instead of the gift tax
FALSE
The generation-skipping tax is made in addition to the federal gift and estate taxes
T/F
The generation-skipping transfer tax is imposed instead of the estate tax
FALSE
The generation-skipping tax is made in addition to the federal gift and estate taxes
T/F
The generation-skipping transfer tax is imposed at the highest tax rate under the transfer tax rate schedule
TRUE
T/F
The generation-skipping transfer tax is imposed when an individual makes a gift to a grandparent
FALSE
The generation skipping transfer tax is designed to prevent an individual from ___
Escaping an entire generation of gift and estate taxes by transferring property to a person that is two or more generations below that of the transferor
The generation skipping transfer tax is imposed at ____ % for 2014 under the transfer tax rate schedule
40%
An estate’s distributable net income is generally its taxable income ______ (before/after) the income distribution deduction
BEFORE
An estate’s distributable net income is generally its taxable income before ______ (increased/decreased) by its personal exemption
Increased
An estate’s distributable net income is generally its taxable income before ______ (increased/decreased) by any net capital loss deducion
Increased
An estate’s distributable net income is generally its taxable income before ______ (increased/decreased) by it’s tax-exempt interest reduced by related nondeductible expenses
Increased
An estate’s distributable net income is generally its taxable income before ______ (increased/decreased) by any net capital gains allocable to corpus
Decreased
The maximum amount to be included in a beneficiary’s gross income for distribution from estate income that was currently required is ____
Distributable Net Income
The maximum amount of distributions deduction for an estate is_____
Distributable Net Income
T/F
With regard to estimated income tax, estates must make quarterly estimated tax payments starting no later than the 2nd quarter following the one in which the estate was established
FALSE
Trusts & estates must make quarterly estimated tax payments except that an estate is exempt from making estimated tax payments for taxable years ending within 2 years of the decedent’s death
T/F
With regard to estimated income tax, estates are exempt from paying estimated tax during the estate’s first two taxable years
TRUE
Trusts & estates must make quarterly estimated tax payments except that an estate is exempt from making estimated tax payments for taxable years ending within 2 years of the decedent’s death
T/F
With regard to estimated income tax, estates must make quarterly estimated tax payments only if the estate’s income is required to be distributed currently
FALSE
Trusts & estates must make quarterly estimated tax payments except that an estate is exempt from making estimated tax payments for taxable years ending within 2 years of the decedent’s death
T/F
With regard to estimated income tax, estates are not required to ake payments of estimated tax
FALSE
Trusts & estates must make quarterly estimated tax payments except that an estate is exempt from making estimated tax payments for taxable years ending within 2 years of the decedent’s death
A _____ trust is a trust that permits accumulation of current income, provides for charitable contributions, or distributes principal during the taxable year
Complex
A _____ trust is a trust that is required to distribute all of its income to designated beneficiaries each year, has no beneficiaries that are qualifying charitable organizations, and makes no distributions of trust corpus (principal) during the year
Simple
T/F
A complex trust is any trust that is not a simple trust
TRUE
What is Trust Corpus?
Principal
What is the standard deduction for a trust or an estate in the fiduciary income tax return?
$0 - there is no STANDARD deduction
A personal exemption is allowed for an estate or trust on the fiduciary income tax return. The personal exemption is ___ for an estate, ____ for a trust required to distribute all incme currently, and ___ for all other trusts
$600
$300
$100
T/F
Estates are required to use the calendar year as their taxable period for income tax purposes
FALSE
T/F
Trusts (except those that are tax exempt) are required to use the calendar year as their taxable period for income tax purposes
TRUE
T/F
Ordinary & necessary administrative expenses paid by the fiduciary of an estate can be deducted on either the estate’s fiduciary income tax return (Form 1041) or on the estate’s federal estate tax return (Form 706), however they cannot be deducted twice
TRUE
Ordinary & necessary administrative expenses paid by the fiduciary of an estate can be deducted on either the estate’s fiduciary income tax return (Form 1041) or on the estate’s federal estate tax return (Form 706), however they cannot be deducted twice but they CAN be
Allocated between the two returns in any manner that the fiduciary sees fit
If Ordinary and necessary administration expenses paid by the fiduciary of an estate are deductible on the fiduciary income tax return (Form 1041), the estate tax deduction is ____ for these expenses
Waived
An executor of a decedent’s estate that has only US citizens as beneficiaries is required to file a fiduciary income tax return if the estate’s gross income for the year is at least ____
$600
The charitable contribution deduction on an estate’s fiduciary income tax return is allowable only if…
The decedent’s will specifically provides for the contribution
The private foundation status of an exempt organization will terminate if it….
Becomes a public charity
Small, exempt organizations who gross receipts are ____ or less are generally eligible to annualy file an electronic form ____ (e-Postcard)
$50,000
990-N
Organizations that can qualify as exempt organizations are listed in Sec. ___ of the Internal Revenue Code
501
To receive exempt status an organization must ___
File a written application with the IRS
T/F
to qualify as an exempt organization the applicant may be organized and operated for the primary purpose of carrying on a business for profit, provided that all the organizations net earnings are turned over to one or more tax exempt organizations
FALSE
And exempt organization cannot be organized for the primary purpose of carrying on business for profit
T/F
to qualify as an exempt organization the applicant need not be specifically identified as one of the classes upon which exemption is conferred by the Internal Revenue Code, provided that the organizations purposes and activities are of a nonprofit nature
FALSE
An organization must be one of those classes upon which exemption is specifically conferred by the Internal Revenue Code
T/F
to qualify as an exempt organization the applicant must not be classified as a social club
FALSE
A Social club organized for recreation will qualify for exemption if substantially all of the activities of the club are for such purposes and none of the profits inure to the benefit of any shareholder
T/F
to qualify as an exempt organization the applicant must not be a private foundation organized and operated exclusively to influence legislation pertaining to protection of the environment
TRUE
The filing of a return covering unrelated business income is required of all exempt organizations having at least ____ of unrelated business taxable income for the year
$1000
T/F
Exempt organizations that are required to file annual information returns need not disclose the identity of all substantial contributors, in addition to the amount of contributions received, as this is private information
FALSE
This must be disclosed
If business is legal and confined to exempt organizations, it will result in…
Tax-Exempt unrelated business income, even if over the $1,000 amount
____ recommends an apportionment formula that equally weighs sales, payroll, and property
UDITPA
What is the formula for the fireign tax credit limitation?
(Foreign TI / Worldwide TI) * US Tax
Foreign Tax Credit Limitation
Any unused foreign tax credit can be carried back ___ & forward ____
1 year
10 years
