25 May Question 1. Beforehis nephew(Dean) leavesfor college,Will loanshim $400,000.Dean
Question
1. Beforehis nephew(Dean) leavesfor college,Will loanshim $400,000.Dean signsanotepromisingtorepaytheloaninfiveyears.Nointerest elementisprovided.Which,ifany,ofthefollowingisataxconsequenceofthisarrangement?
a. Willhas notmade agifttoDeanoftheinterestelement.
b. Willhas aninterestexpense deductionas tothe interestelement.
c. Deanhasinterestincomeasto theinterestelement.
d. Deanmay beallowed anincometax deductionas totheinterest element.
e. Noneof theabove.
2. Whichofthefollowingstatementsrelatingto theFederalgifttaxisincorrect?
a. Thedeemed paidcredit allowedfor apriortaxablegiftcannotbelessthanthegifttaxthatwasactuallypaid.
b. Theissuance ofan effectivedisclaimerby anheir willpassthe propertyto anotherwithoutbeing subjecttotheFederal gifttax.
c. Theannual exclusionisnot availablefor giftsof futureinterests.
d. Upto5yearsofannualexclusionscanbeavailableforgiftsinvolving§529plans(qualified tuition programs).
e. Noneof theabove.
3. Concerningthe electionto splitgifts under§2513,whichofthefollowingstatementsisincorrect?
a. Theelectioncan bemadeeven iftheparties arenotmarried fortheentire yearofthe gift.
b. Theelectiondoestakeintoaccountanypriortaxablegiftsmadebyeitherspouses.
c. Theelection doublesthe numberof annualexclusions available.
d. Theelectionhas noutility inacommunitypropertyjurisdiction.
e. Theelectioncan bemadeeven ifthe partiesaredivorced aslong asneitherspouse hasremarried bytheendoftheyear.
4. Which, ifany, ofthe followingis acorrectstatement regardingthefilingofagifttaxreturn(Form709)?
a. AdonormustfileaForm709inthesameyearinwhichthegiftwasmade.
b. Thedue dateof aForm709isthesameastheduedateofthedonor’sForm1040.
c. AForm709mayhavetobefiledeventhoughthevalueofthegiftwaslessthantheamountoftheannualexclusion.
d. Melodygives herhusbandanewMercedesconvertibleforhisbirthday.MelodymustfileaForm709toreportthegifteventhoughnogifttaxresults.
e. Noneof theabove.
5. Markdies onMarch 6,2013. Which, if any, of the following itemsisnotincludedinhisgrossestate?
a. Interestearned (beforedeath)on Cityof Clevelandbonds.
b. CashdividendonstockownedbyMark—declaration datewasFebruary3,2013,and recorddatewas
March 5,2013.
c. Federalincometaxrefund for2012—receivedon March5,2013.
d. Insurancerecovery onautoaccident thatoccurredon February25,2013.
e. Insurancerecoveryfrom theftofsailboat onMarch 7,2013.
6. Andreadies onApril 30,2013. Which,ifany, ofthe followingitemsisincludedinher grossestate?
a. Rentsfor themonth ofMay (receivedon May2, 2013)onan apartmentbuilding sheowned.
b. Rentsfor themonthof March(receivedon May2,2013) onan apartmentbuilding sheowned.
c. InsurancerecoveryfromafirewhichoccurredonNovember1,2013,anddestroyedAndrea’sresidence.
d. AloanmadebyAndreatoherdaughter andforgivenbyAndreain2010.
e. Noneof theabove.
7. Atthe timeofhisdeath,Nortonwasinvolvedinthefollowingtransactions.
• Ownedlandin jointtenancywith Emily.Theland isworth$600,000 andwaspurchased byNorton15yearsagofor$150,000.
• Ownedland inatenancybytheentiretywithAmy.Thelandisworth$800,000andwaspurchased byNortonfiveyearsagofor$450,000.
• OwnedlandinanequaltenancyincommonwithNoah. Thelandisworth$400,000andwaspurchasedby Nortonfour yearsago for$300,000.
• OwnedCity ofDayton bondsworth $500,000.
Whatamountis includedin Norton’sgrossestate?
a. $900,000.
b.$1,100,000.
c.$1,700,000.
d.$2,100,000.
e.Noneof theabove.
8. Atthe timeof herdeath onOctober 4,2013, Kaitlynwas involvedin thefollowing transactions.
• Wasthesole lifebeneficiary ofatrust(assetsworth$2million)created10yearsagobyPaul (Kaitlyn’shusband).Thetransferwasbygiftofsecuritiesthenworth$500,000(PauldidnotmakeaQTIPelection).PaulandKaitlyn’schildrenaretheremainderpersons.
• OwnedstockinMauveCorporation(basisof $800,000andfairmarketvalueof$1 million).On September 7,2013,adividend of$48,000wasdeclaredonthestockpayabletoallshareholders on recordasofOctober3,2013.The$48,000wasreceivedbyKaitlyn’sexecutoronOctober 19, 2013.
• Kaitlynmade ataxablegiftof$400,000in2002.
Astothesetransactions,Kaitlyn’sgrossestateincludes:
a. $1,048,000.
b.$1,448,000.
c. $3,000,000.
d.$3,048,000.
e.Noneof theabove.
9. Atthe timeof hisdeath, Jasonwas aparticipantinSilverCorporation’squalifiedpensionplanandgrouptermlife
insurance. Thebalance ofthe survivorshipfeature inhis pensionplan is:
| Contributions bySilver | $800,000 |
| After-taxcontributions byJason | 400,000 |
| Planearnings | 300,000 |
Theterm insurancehas amaturityvalueof$100,000.AllamountsarepaidtoPam,Jason’sdaughter.Oneresultof thesetransactionsis:
a. Pammust payincome taxon $300,000.
b. Pammust payincome taxon $1,100,000.
c. Jason’sgrossestatemustinclude$1,200,000.
d. Jason’sgrossestatemustinclude$1,500,000.
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