Estate Planning Exam 2 questions well
answered graded A+
List the elements of a gift. - correct answer ✔✔ The donor must have the intent to make a
voluntary transfer, the donor must be competent to make the gift, the donee must be capable
of receiving the gift, the done must take delivery, and the donor must actually part with
dominion and control over the gifted property.
List and define the various types of gifts - correct answer ✔✔ Direct gifts are direct payments of
cash or transfer of property to a donee. Indirect gifts are payments or transfers to a third party
on behalf of a donor for the benefit of the donee. Complete and incomplete transfers include a
revocable beneficiary designation or a transfer to a revocable trust. Reversionary interests have
been transferred and subsequently revert back to the transferor. Net gifts require the donee to
pay the gift tax.
List the imputed interest rules for no-interest loans and below-market loans. - correct answer
✔✔ Loans less than $10,000 have no imputed interest. Loans between $10,000 and $100,000
have imputed interest between the lesser of net investment income of borrower or interest
calculated using AFR less interest calculated using the stated rate on the loan. Loans over
$100,000 have imputed interest calculated using AFR less interest calculated using the stated
rate on the loan.
How is the creation of a joint bank account where one party contributes the entire amount
treated for gift tax purposes? - correct answer ✔✔ It is a gift only if the non-contributing party
uses the funds for their own benefit.
Discuss the requirements and limitations of the annual exclusion. - correct answer ✔✔ In 2018,
gifts up to $15,000 can be made per donee per year gift tax free. To get an annual exclusion, the
gift must be of present interest. The annual exclusion and any unused amount expires at the
end of the year.
,Explain the advantage of using the election to split gifts. - correct answer ✔✔ When a donor
wants to donate but the donor's spouse does not, the donor can use their spouse's annual
exclusion, with their consent, and double the gift of $15,000 to $30,000 without any gift tax.
Explain the use of the Crummey provision. - correct answer ✔✔ A beneficiary can withdraw
from a future interest gift and make it a present interest and it can qualify for the annual
exclusion. This provision allows the beneficiary to withdraw the lesser of the annual
contribution or exclusion.
Qualified transfers allow certain indirect gifts to be excluded from gift taxation. Explain these
gifts and the requirements to exclude them from gift taxation. - correct answer ✔✔ A qualified
transfer is a payment made directly to a qualified educational institution, for tuition, or medical
care provider to qualifying medical expenses of someone else. To qualify for exclusion of gift tax,
the payments have to be paid directly to the institution or medical care provider.
How are gifts to spouses treated for gift tax purposes? - correct answer ✔✔ Gifts from or to
spouses are not gift taxable due to the marital deduction as long as the spouse is a U.S. citizen.
If a spouse is not a U.S. citizen, then there is an annual exclusion.
What is the due date to file Form 709, the United States Gift (and Generation-Skipping Transfer)
Tax Return? - correct answer ✔✔ The due date to file Form 709 is April 15 of the year after the
gift is made.
Who must file Form 709, the United States Gift (and Generation-Skipping Transfer) Tax Return? -
correct answer ✔✔ Anyone who makes a gift in the year the gift is made must file a gift tax
return unless the gifts aren't eligible for gift tax and are below the annual exclusion.
List the steps in calculating the gift tax. - correct answer ✔✔ Sum the total gifts for the calendar
year. Subtract the total exclusions and deductions. Add the donor's taxable gifts for the calendar
year to the donor's previous taxable gifts for all prior calendar years. Calculate the gift tax on
the total gifts based on the estate and gift tax rate schedule. Calculate the gift tax on prior year
gifts based on the estate and gift tax rate schedule. Reduce the gift tax on total gifts by the gift
, tax on prior gifts. Reduce the net gift tax by the remaining applicable credit. The net of the gift
tax less the remaining applicable credit is the amount of gift tax that must be paid in the current
year.
A donee's adjusted basis of gifted property is generally the donor's basis. List the two
circumstances when this is not true. - correct answer ✔✔ When the fair market value of the
property at the date of the gift is less than the donor's adjusted basis. When the donor gives
property with a fair market value in the excess of his adjusted basis and the donor pays gift tax.
List three advantages of making lifetime gifts as compared to transfers at death. - correct
answer ✔✔ Any appreciation on a gifted asset occurring after the date of the gift is excluded
from the donor's gross estate. Any gift tax paid on a taxable gift is excluded from the donor's
gross estate if the gift was made more than three years prior to the donor's death. The cash
used to pay the estate tax is included in the decedent's federal gross estate.
Grandmother Jones contributed $2,500,000 to a revocable trust. She has a life expectancy of 24
years and she will receive an 8% per year annuity from the trust. At her death, the corpus will
be paid to her granddaughter, Lisa. What is Grandmother Jones's taxable gift? - correct answer
✔✔ $0
In the current year, Jerry loaned his daughter, Charisse, $15,000 to purchase a new car. The loan
was payable on demand, but there was no stated interest rate. The applicable federal rate for
the current year was 10%, and Charisse had $900 of net investment income for the year. For gift
tax purposes with regards to this loan, how much has Jerry gifted Charisse during the current
year? - correct answer ✔✔ $0
Mary and Emile would like to give the maximum possible gift that they can to their son without
having to pay gift tax. Mary and Emile have never filed a gift tax return and live in a community-
property state. How much can they transfer in 2018 to their son free of gift tax? - correct
answer ✔✔ $22,390,000
answered graded A+
List the elements of a gift. - correct answer ✔✔ The donor must have the intent to make a
voluntary transfer, the donor must be competent to make the gift, the donee must be capable
of receiving the gift, the done must take delivery, and the donor must actually part with
dominion and control over the gifted property.
List and define the various types of gifts - correct answer ✔✔ Direct gifts are direct payments of
cash or transfer of property to a donee. Indirect gifts are payments or transfers to a third party
on behalf of a donor for the benefit of the donee. Complete and incomplete transfers include a
revocable beneficiary designation or a transfer to a revocable trust. Reversionary interests have
been transferred and subsequently revert back to the transferor. Net gifts require the donee to
pay the gift tax.
List the imputed interest rules for no-interest loans and below-market loans. - correct answer
✔✔ Loans less than $10,000 have no imputed interest. Loans between $10,000 and $100,000
have imputed interest between the lesser of net investment income of borrower or interest
calculated using AFR less interest calculated using the stated rate on the loan. Loans over
$100,000 have imputed interest calculated using AFR less interest calculated using the stated
rate on the loan.
How is the creation of a joint bank account where one party contributes the entire amount
treated for gift tax purposes? - correct answer ✔✔ It is a gift only if the non-contributing party
uses the funds for their own benefit.
Discuss the requirements and limitations of the annual exclusion. - correct answer ✔✔ In 2018,
gifts up to $15,000 can be made per donee per year gift tax free. To get an annual exclusion, the
gift must be of present interest. The annual exclusion and any unused amount expires at the
end of the year.
,Explain the advantage of using the election to split gifts. - correct answer ✔✔ When a donor
wants to donate but the donor's spouse does not, the donor can use their spouse's annual
exclusion, with their consent, and double the gift of $15,000 to $30,000 without any gift tax.
Explain the use of the Crummey provision. - correct answer ✔✔ A beneficiary can withdraw
from a future interest gift and make it a present interest and it can qualify for the annual
exclusion. This provision allows the beneficiary to withdraw the lesser of the annual
contribution or exclusion.
Qualified transfers allow certain indirect gifts to be excluded from gift taxation. Explain these
gifts and the requirements to exclude them from gift taxation. - correct answer ✔✔ A qualified
transfer is a payment made directly to a qualified educational institution, for tuition, or medical
care provider to qualifying medical expenses of someone else. To qualify for exclusion of gift tax,
the payments have to be paid directly to the institution or medical care provider.
How are gifts to spouses treated for gift tax purposes? - correct answer ✔✔ Gifts from or to
spouses are not gift taxable due to the marital deduction as long as the spouse is a U.S. citizen.
If a spouse is not a U.S. citizen, then there is an annual exclusion.
What is the due date to file Form 709, the United States Gift (and Generation-Skipping Transfer)
Tax Return? - correct answer ✔✔ The due date to file Form 709 is April 15 of the year after the
gift is made.
Who must file Form 709, the United States Gift (and Generation-Skipping Transfer) Tax Return? -
correct answer ✔✔ Anyone who makes a gift in the year the gift is made must file a gift tax
return unless the gifts aren't eligible for gift tax and are below the annual exclusion.
List the steps in calculating the gift tax. - correct answer ✔✔ Sum the total gifts for the calendar
year. Subtract the total exclusions and deductions. Add the donor's taxable gifts for the calendar
year to the donor's previous taxable gifts for all prior calendar years. Calculate the gift tax on
the total gifts based on the estate and gift tax rate schedule. Calculate the gift tax on prior year
gifts based on the estate and gift tax rate schedule. Reduce the gift tax on total gifts by the gift
, tax on prior gifts. Reduce the net gift tax by the remaining applicable credit. The net of the gift
tax less the remaining applicable credit is the amount of gift tax that must be paid in the current
year.
A donee's adjusted basis of gifted property is generally the donor's basis. List the two
circumstances when this is not true. - correct answer ✔✔ When the fair market value of the
property at the date of the gift is less than the donor's adjusted basis. When the donor gives
property with a fair market value in the excess of his adjusted basis and the donor pays gift tax.
List three advantages of making lifetime gifts as compared to transfers at death. - correct
answer ✔✔ Any appreciation on a gifted asset occurring after the date of the gift is excluded
from the donor's gross estate. Any gift tax paid on a taxable gift is excluded from the donor's
gross estate if the gift was made more than three years prior to the donor's death. The cash
used to pay the estate tax is included in the decedent's federal gross estate.
Grandmother Jones contributed $2,500,000 to a revocable trust. She has a life expectancy of 24
years and she will receive an 8% per year annuity from the trust. At her death, the corpus will
be paid to her granddaughter, Lisa. What is Grandmother Jones's taxable gift? - correct answer
✔✔ $0
In the current year, Jerry loaned his daughter, Charisse, $15,000 to purchase a new car. The loan
was payable on demand, but there was no stated interest rate. The applicable federal rate for
the current year was 10%, and Charisse had $900 of net investment income for the year. For gift
tax purposes with regards to this loan, how much has Jerry gifted Charisse during the current
year? - correct answer ✔✔ $0
Mary and Emile would like to give the maximum possible gift that they can to their son without
having to pay gift tax. Mary and Emile have never filed a gift tax return and live in a community-
property state. How much can they transfer in 2018 to their son free of gift tax? - correct
answer ✔✔ $22,390,000
