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Exam 25: Transfer Taxes and Wealth Planning

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Question 51

Multiple Choice

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At his death Stanley owned real estate worth $345,000 with two other individuals as equal tenants in common. Stanley contributed $50,000 to the $100,000 total cost of the property. What amount, if any, is included in Stanley's gross estate?

A) $50,000.
B) $172,500.
C) $345,000.
D) $115,000.
E) None of the choices are correct.

F) C) and E)
G) None of the above

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Question 52

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Property inherited from a decedent has an adjusted basis equal to the value of the property included in the decedent's estate.

A) True
B) False

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Question 53

Multiple Choice

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The estate and gift taxes share several common features. Which of the following characteristics are common to both the estate and gift taxes?

Ashley owns a whole-life insurance policy worth $25,000 that directs the insurance company to pay the beneficiary $500,000 on her death. Ashley pays the annual policy premiums and has the power to designate the beneficiary of the policy. What value of the policy, if any, would be included in Ashley's estate upon her death?

The gross estate may contain property transfers that are not included in the probate estate.

Joshua and David purchased real property for $500,000 as equal tenants in common. Although they are listed as equal co-owners, Joshua was only able to provide $200,000 of the purchase price. David treated the additional $100,000 of his contribution to the purchase price as a gift to Joshua. If the property is worth $2.5 million at Joshua's death, what amount would be included in Joshua's estate?

Tracey is unmarried and owns $17 million in stock and bonds. What is the result if Tracey dies this year and leaves all of her property to a qualified charity?

Isaac is married and Isaac and his spouse agree that they want to transfer the maximum amount of cash to each of their four children and six grandchildren. How much cash in total can Isaac and his spouse transfer to his children and grandchildren each year without creating any taxable gifts?

At her death Emily owned real estate worth $2.5 million and other property worth $10 million. Property taxes of $200,000 were accrued on the real estate at the time of Emily's death. Which of the following is a true statement with respect to these items without considering any other owned property?

A withdrawal of money from a bank account held in joint tenancy with the right of survivorship may constitute a completed gift.

A gratuitous transfer of cash made directly to an individual who uses the entire amount of the cash to pay medical expenses is not subject to a gift tax.

The generation-skipping tax is designed to accomplish which of the following?

Which of the following transactions would not utilize the "Section 7520 rate" to calculate the value of the transfer?

The marital and charitable deductions are common to both the estate tax and the gift tax formulas.

Proceeds of life insurance paid to the decedent's estate due to the death of the decedent are included in the decedent's gross estate even if the decedent had no ownership rights in the policy at the time of death.

Which of the following is a completed taxable gift?

Sophia is single and owns the following property: Sophia owns the real property in joint tenancy with Daniel. They purchased the property several years ago for $1 million. Sophia was only able to provide $200,000 of the purchase price. If Sophia dies, what is the amount of her gross estate?

No deductions are allowed when calculating the taxable estate.

A terminable interest in property is any interest that terminates during the current year.

Matthew and Addison are married and live in Michigan, a common-law state. For the holidays Addison gave cash gifts of $40,000 to each of her two sons, and Matthew gave $40,000 to his daughter. What is the amount of Addison's taxable gifts if Matthew and Addison opt to gift split?