TAXA 3300-TAX 497 - Chapter 18

TAXA 3300-TAX 497 - Chapter 18 1. All of the charitable organizations that qualify for estate tax purposes also qualify for income tax purposes. False Some difference exist 2. Al's gross estate consists of assets with a date of death value of $6 million and an alternate valuation date value of $6.1 mil. Under Al's will, all of his property passes outright to Jean (Al's wife). Which valuation should they use and what estate tax will result? Because of the marital deduction, no estate tax results regardless of which calule is used. The alternate valuation cannot be used as the tax liability as with or without the election would be zero but Jean's basis would be $6.1 mil on the property acquired. 3. The alternate valuation date: a. Applies for Federal estate tax purposes b. Applies for Federal gift tax purposes c. Both estate and gift tax d. Neither estate not gift tax Applies for Federal estate tax purposes The election can also be used in computing the GST tax. 4. Although qualified tuition plans under 529 are treated favorably for gift tax purposes, such plans are included in the gross estate upon the grantor's death False Although the contribution to a 529 plan is not cocmplete, nothing is included in the gross estate upon his or her death during the plan's existence. 5. The amount of the unified tax credit is the same for both transfers by gift and transfers by death. True Although not always true, for the past few years, the unified credit has been the same. 6. Andrea dies on April 30. Which, if any, of the following items is included in her gross estate? a. Rents for the month of May (received May 2) on an apartment building she owned b. Rents for the month of March (received on May 2) on an apartment building she owned c. Insurance recovery from a fire which occurred on November 1, and destroyed Andrea's residence d. A loan made by Andrea to her daughter and forgiven by Andrea in her prior tax year. e. None of the above Rents for the month of March (received May 2) on an apartment building she owned. 7. As a result of an auto accident from which she later died, Irene totaled a Bentley worth $195,000. If the insurance company covers $60,000 of the loss, Irene's estate can claim a casualty loss of $135,000 in arriving at the taxable estate. False The casualty loss should be claimed on Irene's final income tax return. The insurance recovery should be included in the gross estate under 2033. 8. At the time of Dylan's death, her was a resident of the US. He owns land located in a foreign country, which is subject to that country's estate tax. This same land also can be subject to Federal estate tax. True Dylan may, however, be able to claim a credit against the Federal estate tax for foreign death taxes paid. 9. At the time of her death, Emma still owed $36,000 on her church pledge for the year. Because church pledges are not an enforceable obligation in the state where Emma resided, her estate cannot claim a deduction for the $36,000 that it owes and later pays. False The deduction is allowed under 2053(c)(1)(A) 10. At the time of her death, Megan was involved in the following: Owned an insurance policy on the life of her father with a replacement cost of $250,000 and maturity value of $800,000. The designated beneficiary of the policy is Megan's estate Was an equal tenant in common with her brother in a tract of land worth $800,000. The land was inherited from their grandmother 10 years ago when it had a value of $200,000 Was a joint tenant with her two sisters in stock worth $1,500,000. The stock was inherited from their grandmother 10 years ago when it had a value of $500,000 As to these transaction, Megan's gross estate must include: $1,150,000 250,000 (insurance policy replacement cost) + 400,000 (equal tenant in common w/ brother) + 500,000 (1,500,000 * 1/3) TAX 497 - Chapter 18 11. At the time of her death on October 4, Kaitlyln was involved in the following transactions: Was the sole life beneficiary of a trust (assets worth $2 mil) created 10 years ago by Paul (Kaitlyn's husband). The transfer was by gift of securities when worth $500,000. Paul and Kaitlyn's children are the remainder persons. Owned stock in Mauve Corporation (basis of $800,000 and FMV of $1 mil). On September 7, a dividend of $48,000 was declared on the stock payable to all shareholders of record on October 3. The $48,000 was received by Kaitlyn's executor on October 19. Kaitlyn made a taxable gift of $400,000 in a prior year tax. As to these transactions, Kaitlyn's gross estate includes: $1,048,000 Mauve stock (FMV) and dividend are included (record date of dividend is before death). Because there is no QTIP election, the trust is not included in a donee spouse's estate. 12. At the time of her death, Rita held a promissory note from a loan she had made to her son. If Rita's will forgives the loan, the noter is not included in her gross estate. False The value of the note is included in Rita's gross estate. 13. At the time of his death, Gene held a Roth IRA account with his wife as the designated beneficiary. The IRA is included in Gene's gross estate. True The Roth IRA is included in the gross estate under 2033 14. At the time of his death, Jason was