1. AS@, a widower, age 65, makes the following gifts: (a) $82,000 of listed secu
ID: 2710068 • Letter: 1
Question
1. AS@, a widower, age 65, makes the following gifts: (a) $82,000 of listed securities to his son, (b) $17,000 cash to his daughter, (c) $6,000 to his granddaughter, and (d) $14,000 to his church. What is the amount of AS=s@ taxable gifts?
A. $63,000
B. $71,000
C. $77,000
D. $83,000
2. In Question 31, assume that AS@ has remarried when he makes the four gifts. What would be the value of the taxable gifts made by AS@ and his wife, if she joins in the gifts?
A. Zero
B. $54,000
C. $71,000
D. $96,000
3. For which of the following gratuitous transfers must a gift tax return be filed?
A. A contribution to a political organization
B. Payment to another person=s legal fees
C. Payment of another person=s hospital bills
D. Payment of educational tuition for another person
4. Richard Poore gave gifts of $30,000 each to his church, his wife, his son, and his mother. Poore also created a trust for his wife with a life income interest valued at $175,000, and his daughter was to receive the remainder interest valued at $7,000. What is the total amount of the annual exclusions used by Richard Poore?
A. $11,000
B. $33,000
C. $56,000
D. $44,000
5. All the following items will be included in AM=s@ gross estate at his death EXCEPT:
A. Municipal bonds exempt from federal income taxes.
B. One-half the value of the residence he owns in joint tenancy with Mrs. AM@.
C. The right to the income for his lifetime derived from a Kansas wheat farm willed to AM@ by his father.
D. A general power of appointment over trust property.
E. A $100,000 life insurance policy owned by AM@ and payable to his wife under a lump sum settlement arrangement.
6. Knowing death was imminent, AX@, a widower, gave $5,000 to each of his four children only a few months before his death. What dollar value would be included in AX=s@ gross estate for these gifts made in contemplation of death?
A. Zero
B. $12,000
C. $16,000
D. $20,000
7. AH@ gave $30,000 cash to his son two years ago, a $50,000 life insurance policy to his sister one year ago, and $6,000 cash to his wife five years ago. He made no other lifetime gifts. AH@ died yesterday. Under these circumstances, which of the following would be included in AH=s@ gross estate?
A. $10,000 of the gift to AH=s@ son
B. The $30,000 gift to his son
C. The life insurance gift to his sister
D. The $30,000 gift to his son and the life insurance gift to his sister
8. AX@, a widower, made a cash gift to his son of $1,000,000 two years before he died and paid a $345,000 gift tax. What is included in his gross estate?
A. $172,500
B. $345,000
C. $1,000,000
D. $1,345,000
9. By the terms of his Will, AK@ gave his wife the right to live in their home until her death. AK=s@ daughter by a former marriage was to have the property upon Mrs. AK=s@ death. Under these circumstances, which of the following statements is correct?
A. The property would be included in Mrs. AK=s@ gross estate.
B. The property will be excluded from AK=s@ gross estate
C. Mrs. AK@ has a contingency interest in the property.
D. Mrs. AK=s@ interest terminates at her death.
10. AR@, age 70, placed $100,000 of securities in an irrevocable trust to provide a lifetime income for his sister, age 60. For purely sentimental reasons, AR@ provided that the securities were to be returned to him if his sister failed to survive him. As expected, AR@ died several years before his sister. Why might the IRS include the value of the securities in AR=s@ gross estate?
A. Because AR@ lived beyond his life expectancy.
B. Because AR=s@ reversionary interest is valued at greater than 5%.
C. Because of the present value of the income in respect of a decedent.
D. Because AR@ had the right to specify who will possess or enjoy the income from the securities.
Explanation / Answer
The general rule is that any gift is a taxable gift. However, there are many exceptions to this rule. Generally, the following gifts are not taxable gifts.
a. Gifts that are not more than the annual exclusion for the calendar year. ( The annual exclusion for 2014, 2015, and 2016 is $14,000.)
b. Tuition or medical expenses you pay for someone (the educational and medical exclusions).
c. Gifts to your spouse.
d. Gifts to a political organization for its use.
Note that each giver and recipient pair has their own unique annual exclusion; a giver can give to any number of recipients and the exclusion is not affected by other gifts that recipient may have received from other
Now
1. Answer is B $71,000 {( 82,000 -14,000) + (17,000-14000)}
2. Answer is B $ 54,000 ( as by splitting their gifts, married couples can give up to twice this amount tax-free)
3. Answer is B (rest all others are covered under exclusion therefor not compulsory to file return)
4. Answer is C ($14,000 x 4)
5. Answer is C ; The right to the income for his lifetime derived from a Kansas wheat farm willed to AM@ by his father
6. Answer D . 20,000 ( since All taxable gifts given within 3 years of death are included )
7. Answer is D. The $30,000 gift to his son and the life insurance gift to his sister
8. Answer is D. $1,345,000 (Gifts made within 3 years of the decedent's death plus any gift taxes paid on these gifts are added to the estate)
9. Answer is C. Mrs. AK@ has a contingency interest in the property.
10. Answer is D. Because AR@ had the right to specify who will possess or enjoy the income from the securities
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