R4 - Estate, Trust, and Gift Taxation Flashcards
Estates are subject to two separate taxes. What are they?
1) Income tax
2) Estate tax
What is defined as a one-time only transfer tax based on the value of the decedent’s estate (taxed to the estate before the property is transferred)?
Estate tax
Are all gifts subject to the gift tax?
NO
Gifts of what amount or less per year/per donee are excluded?
$14,000
True or false.
For 2015, a $2,117,800 unified estate and gift tax credit effectively exempts from the gift tax cumulative, nonexcluded gifts having a value of $5,430,000.
True
What is defined as a limitation on the amount the trust or estate can deduct (on line 18 of IRS Form 1041) with respect to distributions to beneficiaries?
DNI (distributable net income)
The income distribution deduction equals the lesser of what two things?
- actual distribution to beneficiary OR
- DNI (less adjusted tax-exempt interest)
An estate is required to file an income tax return when annual income exceeds what amount?
$600
An estate is exempted from making estimated tax payments for what time period?
Its first two years
True or false.
All trusts, except tax-exempt trusts, must use a calendar year.
True
What kind of trust only makes distributions out of current income and cannot make distributions from the trust corpus?
Simple trusts
What type of trust is entitled to a $300 exemption in arriving at its taxable income?
Simple trusts
What type of trust is permitted to an exemption of $100 in arriving at its taxable income?
Complex trusts
An estate must file what form if the gross value of the estate plus historical taxable gifts by the decedent exceed $5,430,000 in 2015?
IRS Form 706
The Form 706 must be filed within how many months after the decedent’s death (unless an extension is requested)?
9 months
Can foreign death tax credits reduce the gross estate tax?
YES
Who pays the gift tax?
Person giving the gift
True or false.
Ordinary and necessary administration expenses paid by the fiduciary of an estate are deductible on the fiduciary income tax return only if the estate tax eduction is waived for these expenses.
True
Pat created a trust, transferred property to this trust, and retained certain interests. For income tax purposes, Pat was treated as the owner of the trust. Pat has created which of the following types of trusts?
Grantor trust
In calculating the estate transfer tax, what is included in the gross estate?
- FMV property
- Insurance proceeds
- Incomplete gifts
- Revocable transfers
- Income in respect of decedent
How do you calculate adjusted gross estate?
Gross estate
(Nondiscretionary deductions)
= Adjusted gross estate
How do you calculate taxable estate?
Adjusted gross estate
(Discretionary deductions)
= Taxable estate
In calculating the estate transfer tax, what is included in discretionary deductions?
- Charitable bequests, unlimited
- Marital deduction, unlimited
Discretionary or nondiscretionary deduction.
Funeral expenses
Nondiscretionary
Discretionary or nondiscretionary deduction
Claims against the estate
Nondiscretionary
Discretionary or nondiscretionary deduction
Administrative expenses
Nondiscretionary
Discretionary or nondiscretionary deduction
Medical expenses
Nondiscretionary
Identify appropriate the federal estate tax/income tax deduction.
Decedent’s medical expenses paid w/i one year of death.
Deductible on either the decedent’s estate tax return or the decedent’s individual income tax return.
Identify the appropriate federal estate tax/income tax deduction.
Expenses of administering and settling the estate.
Deductible on either the decedent’s estate tax return or the estate’s individual income tax return
EXPLANATION: The expenses of administering and settling the estate are an estate deduction or may be deducted on the estate’s Form 1041
Identify the appropriate federal estate tax/income tax deduction.
Decedent’s auto loan outstanding at death
Deductible from the decedent’s gross estate to arrive at taxable estate
EXPLANATION: Outstanding debts of the decedent are estate deductions, which reduce the gross estate (Form 706)
Identify the appropriate federal estate tax/income tax deduction
A bequest in the decedent’s will to transfer assets to his son
Not deductible on either the decedent’s estate tax return or the decedent’s individual tax return
EXPLANATION: Bequests to children are not permitted on either the estate tax return or the decedent’s individual income tax return
