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Exam 27: Family Tax Planning

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Question 91

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In what manner does the tax law favor contributions to qualified tuition plans under § 529?

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Income earned by § 529 plans is free of ...

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Question 92

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Classify each statement appropriately. a.Deductible from the gross estate in arriving at the taxable estate.b.Not deductible from the gross estate in arriving at the taxable estate. -Casualty loss to property after the death of the owner.

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Question 93

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Under certain circumstances,the gift-splitting election can be made even though the electing spouses are no longer married to each other.

At the time of his death on August 7,Michael owned the following assets. ∙ Green Corporation stock (cost $700,000,FMV $950,000).On July 20,Green declared a cash dividend,payable on August 17 to all shareholders as of the record date of August 8.Michael's executor receives the $64,000 dividend on the scheduled payment date. ∙ Note receivable (face amount $600,000) payable on demand.The note was received by Michael two years previously from his daughter Addison.Addison used the loan to start a business which currently is very successful.In his will,Michael forgives the note. How much,as to these transactions,is included in Michael's gross estate?

When Travis learns he is seriously ill,he transfers an insurance policy on his life (maturity value of $2,000,000) to his wife Alexis.The couple's adult children are the designated beneficiaries of the policy.Has Travis acted wisely?

Reba purchases U.S.savings bonds which she lists in the name of Rod,Reba's son.The purchase of the bonds does not constitute a gift.

In the case of a transfer by gift,a QTIP election causes the property to be subject to the estate tax upon the death of the donee spouse.

June made taxable gifts as follows: $200,000 in 1977,$600,000 in 1985,and $700,000 in 2001.In 2015,June dies leaving a taxable estate of $4,000,000.June's tax base for applying the unified tax rate schedules (for estate tax purposes) is:

The U.S.has death tax conventions (i.e. ,treaties) with most of the countries of the world.

Cole purchases land for $500,000 and transfers it by gift to his two daughters,Madison and Paige,as equal joint tenants with the right of survivorship.Ten years later,when the land is worth $2,000,000,Madison predeceases Paige.Madison's executor includes none of the value of the land in her gross estate,as she contributed nothing toward its cost.Do you agree?

Match each statement with the correct choice. Some choices may be used more than once or not at all. a.In the current year, Debby, a widow, dies. Two years ago she inherited a large amount of wealth from her brother.b.Death does not defeat an owner's interest in property.c.Exists only if husband and wife are involved.d.A type of state tax on transfers by death.e.Must decrease the amount of the gross estate.f.Annual exclusion not allowed.g.Cumulative in effect.h.Right of survivorship present as to type of ownership.i.Avoids the terminable interest rule of the marital deduction.j.Exemption equivalent.k.Bypass amount.l.No correct match provided. -Federal gift tax

In 2005,Thalia purchases land for $900,000 and lists title in the names of her daughters as follows: "April and Theresa,joint tenants with right of survivorship." In 2007,April and Theresa purchase an apartment building for $1 million as equal tenants in common;April furnished $400,000 and Theresa furnished $600,000 of the cost.April dies first in 2015 when the land is worth $1.5 million and the apartment building is worth $2 million.One of the results of these transactions is:

Classify each statement appearing below. a.No taxable transfer occurs b.Gift tax applies c.Estate tax applies -Howard establishes a trust,life estate to his children,remainder to the grandchildren.Under its terms,the trust is revocable by Howard.

On the date of her death,Ava owned the following: ∙ An insurance policy (face amount of $500,000) on the life of Benjamin (Ava's current husband) with herself as the designated beneficiary.The policy has a cash surrender value of $50,000. ∙ A life estate in a trust created by Alexander (Ava's deceased prior husband).The trust (current value of $2,900,000) was worth $1,000,000 when created ten years ago.A QTIP election was made by the executor of Alexander's estate. ∙ Federal income tax refund of $80,000 on a prior year's tax return and paid to the executor of Ava's estate. As to these items,how much is included in Ava's gross estate?

Interest on state and local bonds is not subject to the Federal estate tax.

Classify each statement appropriately. a.Deductible from the gross estate in arriving at the taxable estate.b.Not deductible from the gross estate in arriving at the taxable estate. -Payment of unpaid gift taxes.

Classify each statement appearing below. a.No taxable transfer occurs b.Gift tax applies c.Estate tax applies -Homer purchases a U.S.savings bond listing title as: "Homer,payable to Bernice upon Homer's death." Bernice is Homer's sister.Homer dies four years later,and Bernice cashes in the bond and keeps the proceeds.

Classify each statement appearing below. a.No taxable transfer occurs b.Gift tax applies c.Estate tax applies -Clarence pays the medical providers (e.g. ,physicians,hospital) for his aunt's knee replacement operation.The aunt does not qualify as Clarence's dependent.

Stacey inherits unimproved land (fair market value of $6 million) from her father on June 1,2014.Stacey disclaims her interest in the property as follows: one-third on December 1,2014;one-third on January 3,2015;and the remaining one-third on May 31,2015.In all cases,the disclaimers pass the interest to her son (the next heir under state law) .The Federal gift tax applies to Stacey for:

A marital deduction is not allowed if the surviving spouse is a nonresident alien.