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Exam 25: Transfer Taxes and Wealth Planning of the Cfa Institute

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Question 31

Multiple Choice

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Which of the following statements is(are) true?

A) The same transfer tax rate schedule is used to calculate both the estate tax and the gift tax.
B) The transfer tax rate schedule is regressive in nature.
C) The amount of the unified credit varies according to whether the taxable transfer is inter vivos or testamentary.
D) The exemption equivalent automatically offsets transfers in calculating cumulative taxable transfers.
E) All of these are true.

F) B) and C)
G) All of the above

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Question 32

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A serial gift strategy consists of arranging a trust to maximize the value of the unified credit.

A) True
B) False

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Question 33

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Property is included in the gross estate at the value a willing buyer would pay a willing seller, neither being under any compulsion to buy or to sell, and both having reasonable knowledge of the relevant facts.

Property inherited from a decedent has an adjusted basis equal to the value of the property included in the decedent's estate.

For the holidays, Samuel gave a necklace worth $35,000 to Jennifer and jewelry worth $44,000 to Savannah. Samuel is married to Wendy and they live in a community property state. Has Samuel made any taxable gifts and, if so, in what amounts?

Andrea transferred $500,000 of stock to a trust, with income to be paid to her niece for 20 years (value $125,000) and the remainder to her nephew (value $375,000). Andrea named a bank as independent trustee but retained the power to determine how much income, if any, will be paid in any particular year. What is the amount of the taxable gift, if any? Explain your answer.

Adjusted taxable gifts are added to the taxable estate to accomplish which of the following objectives?

The tax on cumulative taxable gifts is reduced by the unified credit regardless of whether any unified credit was used in prior years.

Alexis transferred $400,000 to a trust with directions to pay income to her spouse, William, for his life. After William's death the corpus of the trust will pass to William's son. If the life estate is valued at $72,000, what is the total amount of the taxable gifts?

The marital and charitable deductions are common to both the estate tax and the gift tax formulas.

The estate and gift taxes share several common features. Which of the following characteristics are common to both the estate and gift taxes?

No deductions are allowed when calculating the taxable estate.

A transfer of cash to a bank account held in joint tenancy with the right of survivorship is not a completed gift.

The calculation of the value of a life estate in a trust generally does not depend upon which of the following factors?

For 2014, the exemption equivalent for the estate tax is $5.34 million.

This year Evelyn created an irrevocable trust to provide for Ed, her 32-year-old nephew, and Ed's family. Evelyn transferred $150,000 to the trust and named a bank as the trustee. The trust was directed to pay income to Ed until he reaches age 35 (three years from now), and at that time the trust is to be terminated and the corpus is to be distributed to Ed's two children (or their estates). Determine the amount, if any, of the taxable gift. The relevant interest rate is 6 percent.

The gross estate will not include the value of clothes and other personal items owned by the decedent at the time of death.

The unified credit is designed to:

Ricardo transferred $1,000,000 of cash to State University for a new sports complex. Calculate the amount of the taxable gift.

Which of the following transfers is a completed gift?