Gift & Estate Tax Flashcards by Grace-Allison Patchett

What is the exclusion for tax on a gift?

$14,000

How well did you know this?

Not at all

Perfectly

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

How well did you know this?

Not at all

Perfectly

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

How well did you know this?

Not at all

Perfectly

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

How well did you know this?

Not at all

Perfectly

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

How well did you know this?

Not at all

Perfectly

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

How well did you know this?

Not at all

Perfectly

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

How well did you know this?

Not at all

Perfectly

This is the form for filing a gift tax return

Form 709

How well did you know this?

Not at all

Perfectly

A gift tax return must be filed on a ______ basis

Calendar-Year

How well did you know this?

Not at all

Perfectly

When is a gift tax return due?

On or before April 15th of the following year

How well did you know this?

Not at all

Perfectly

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)

How well did you know this?

Not at all

Perfectly

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

How well did you know this?

Not at all

Perfectly

T/F

The gift tax annual exclusion of $14,000 applies to multiple gifts to the same donee in chronological order

TRUE

How well did you know this?

Not at all

Perfectly

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

How well did you know this?

Not at all

Perfectly

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

How well did you know this?

Not at all

Perfectly

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

How well did you know this?

Not at all

Perfectly

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

How well did you know this?

Not at all

Perfectly

T/F

In computing the net estate tax of a US citizen, the gross estate tax may be offset by prior transfer taxes

TRUE

How well did you know this?

Not at all

Perfectly

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

How well did you know this?

Not at all

Perfectly

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

How well did you know this?

Not at all

Perfectly

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%

How well did you know this?

Not at all

Perfectly

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

How well did you know this?

Not at all

Perfectly

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

How well did you know this?

Not at all

Perfectly

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

How well did you know this?

Not at all

Perfectly

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