REG 45 - Estate and Gift Taxation Flashcards
Which of the following payments would require the donor to file a gift tax return?
A. $30,000 to a university for a spouse’s tuition.
B. $40,000 to a university for a cousin’s room and board.
C. $50,000 to a hospital for a parent’s medical expenses.
D. $80,000 to a physician for a friend’s surgery.
B. There is an unlimited exclusion for education gifts if the tuition is paid directly to the educational institution. However, this exclusion is limited to tuition and does not apply to room and board. For 2014, $14,000 of the gifts to the cousin can be excluded from the gift tax, so the remaining $26,000 is subject to the gift tax. A gift tax return must be filed to reflect this transaction.
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.
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.
T/F: The annual gift tax exclusion is not available for a gift of a remainder interest in real estate.
True
T/F: Charitable contributions qualify for a gift tax deduction regardless of the amount of the contribution.
True
T/F: TP and her daughter D have purchased realty for $50,000 to be held as tenants in common. TP and D each own a half interest in the realty, but TP contributed $40,000 of the purchase price while D only contributed $10,000 of the purchase price. TP has made a gift of $15,000 to D.
True
T/F: The retention of control over a gratuitous transfer by the donor can occur for a taxable gift.
False.
If the donor retains control over the gift, it is not yet taxable.
Fred and Amy Kehl, both U.S. citizens, are married. All of their real and personal property is owned by them as tenants by the entirety or as joint tenants with right of survivorship. The gross estate of the first spouse to die
A. Includes 50% of the value of all property owned by the couple, regardless of which spouse furnished the original consideration.
B. Includes only the property that had been acquired with the funds of the deceased spouse.
C. Is governed by the federal statutory provisions relating to jointly held property, rather than by the decedent’s interest in community property vested by state law, if the Kehls reside in a community property state.
D. Includes one-third of the value of all real estate owned by the Kehls, as the dower right in the case of the wife or curtsey right in the case of the husband.
A. For tenants by the entirety and for joint tenants with rights of survivorship created between spouses, 50 percent of the value of the jointly-owned interest is included in the estate of the decedent spouse. Therefore, the gross estate of the first spouse to die includes 50 percent of the value of all property owned by the couple, regardless of which spouse furnished the original consideration.
Which of the following credits may be offset against the gross estate tax to determine the net estate tax of a U.S. citizen?
I. Unified credit
II. Credit for gift taxes paid on gifts made after 1976
I. yes, II. no
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.
This response correctly indicates that the unified credit may be offset against the gross estate tax to determine the net estate tax of a U.S. citizen and that credits for gift taxes paid for gifts after 1976 may not be used as a credit to offset against the gross estate tax in determining the net estate tax. Note that there is a reduction in the estate tax for the gift taxes paid or payable on post-1976 gifts, but this reduction is not designated as a “credit” by the tax law. It is not a credit because the reduction is computed at the current rates (for the year of death) for post-1976 gifts, NOT the actual amount of gift tax paid in the past.
Which of the following items of property would be included in the gross estate of a decedent who died in 2014?
- Clothes and jewelry of the decedent.
- Cash of $400,000 given to decedent’s friend in 2012. No gift tax was paid on the transfer.
- Land purchased by decedent and held as joint tenants with rights of survivor-ship with decedent’s brother.
1 and 3.
All assets owned by the decedent as of the date of death are included in the gross estate. Even though the land was owned jointly, since it is held with a right of survivorship 100% of the value of the land is included in the estate of the first co-owner to die.
The only exception to this rule is if the other co-owner had paid for a percentage of the land when originally purchased. In that case the percentage purchased by this co-owner would be excluded from the gross estate.
The cash is excluded since it was not owned as of the date of death.
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.
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.
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.
D. An estate tax credit is not allowed for death taxes paid to states.
