Question 11pts

Use the following scenario to answer the next 4 questions. Lois, an elderly single woman, recently came to you to, an estate planning professional, to discuss her estate plan. After a lengthy discussion you determine that Lois completed several transactions last year that may be subject to gift tax. The transactions you uncovered include:

1. Lois had a bank account in the amount of $15,000 that was owned fee simple. She wanted to make sure her son, Ronnie, could access the money "just in case" so she changed the ownership of the account this past January to JTWROS in her and Ronnie's name equally. Ronnie has not made any withdrawals.

2. Feeling guilty about retitling her checking account JTWROS with her son, Lois decided to change the titling of her vintage automobile in February as JTWROS with her daughter, Joyce. Lois purchased the property for $15,000 and the fair market value of the property on the date of retitling was $30,000. Due to a high demand for this particular vintage model the value of the car today is $40,000.

3. Lois received a beneficiary designation form in the mail for her $1,000,000 life insurance policy. The policy never had a beneficiary, so she designated her son, Ronnie and daughter, Joyce, as joint beneficiaries in June. Lois's basis in the policy is $200,000.

4. Lois has two stock portfolio accounts with a local brokerage firm valued at $200,000. Upon her advisor's suggestion, she retitled the account in July as a Transfer on Death account to "save taxes." Upon her death, the assets will transfer equally to her son, Ronnie, and her daughter, Joyce.

5. Lois's daughter Joyce has always been a little poor with budgeting her money. So it was no surprise to Lois that Joyce couldn't afford her daughter, Katelyn's, braces. Feeling sorry for Katelyn, Lois wrote a check payable directly to the dentist in the amount of $50,000 for Katelyn's braces in August.

6.Lois was beginning to become very concerned because her son Ronnie had never married. She was so happy he finally got married she gave Ronnie and his new wife, Sam, $40,000 so they could take a two month trip to Australia as a wedding present in September.

Focusing on the re-titling of the automobile between Joyce and Loisin isolationduring calendar year 2017, what is thenet gift tax valueof the automobile that Lois must report on her Federal Gift Tax Return (Form 709) this year?

$0

$1,000

$15,000

$30,000

Question 21pts

Calculate the value of Lois' total qualified transfers for the current year.

$0

$15,000

$35,000

$50,000

Question 31pts

Calculate Lois' adjusted taxable gifts for the current year.

$13,000

$40,000

$55,000

$63,000

Question 41pts

Which of the following statements regarding Lois' stock portfolio account is correct?

If Lois were to die today, the stock portfolio would be included in her non-probate estate.

The advisor's statement that changing the ownership to a Totten trust will save taxes is a correct statement.

The use of the Totten trust was not appropriate in this instance because Ronnie and Joyce have the ability to withdraw funds from the stock account at any time during Lois' life.

If Lois were to die today, Ronnie and Joyce would receive the assets and have an adjusted basis in the stock equal to Lois's original acquisition cost of the securities.

Question 51pts

Melissa is a very generous single woman. Before this year (2017), she had given $5,450,000 in cumulative adjusted taxable gifts over the years and had, at that time, completely exhausted her applicable credit amount. In the current year, Melissa gave her daughter Riley $100,000 and promptly filed her gift tax return. Melissa did not make any other gifts this year. How muchgift taxmust Riley pay the IRS because of this transaction?

$0

$18,400

$40,000

$47,000

Question 61pts

Jeff has always been a successful businessman. Several years ago he purchased what he thought was prime property in Louisiana for $100,000. Unfortunately, he didn't realize the property was pure swamp land and completely uninhabitable by anyone (except maybe some cajuns from New Orleans). Shortly after he purchased the property, Jeff realized the investment was a flop! To hide his embarrassing investment, he decided to give the property to his cousin Rustin as a graduation present when Rustin graduated from LSU (Geaux Tigers!). When Jeff gave the property to Rustin, the value of the property had fallen to $70,000. Rustin promptly built a house in the middle of the swamp and made his home (assume the cost of the house construction was $0). After six months of owning the property, and sharing his bed with the alligators, Rustin decided to move back to the city. Luckily, he sold the property a week later to an old cajun named Boudreaux for $75,000. What are the income tax consequences toRustin on the sale of the land?

$5,000 short-term capital gain

$5,000 long-term capital gain

$25,000 short-term capital gain

$25,000 long-term capital gain

No gain or loss

Question 71pts

Eric died on July 24. At the time of his death, he owned 1,000 shares of Jefferson Crab stock. Given the trade prices for Jefferson Crab surrounding Eric's date of death, at what value will the Jefferson Crab be included in Eric's gross estate? Thursday, July 15: $101 stock price Monday, July 19: $104 stock price Tuesday, July 27: $103 stock price Wednesday, July 28: $108 stock price

$103,290

$103,440

$103,500

$104,000

Question 81pts

Brody and Tanya recently sold (2017) some land they owned for $150,000. They received the land three years ago as a wedding gift from Brody's Aunt Jeanette. Aunt Jeanette purchased the land many years ago when the property was worth $30,000. At the time of the gift, the property was worth $100,000 and Aunt Jeanette paid $28,800 in gift tax. The annual exclusion amount in 2014 was $14,000 per donee. What is the long term capital gain on the sale of the property?

$42,000

$50,000

$92,000

$120,000

Question 91pts

Use the following information to answer the next 2 questions. Jordan, a single woman, is very generous. She enjoys giving gifts to others and has given taxable gifts of $5,000,000 in prior years. This year (2017) she gave the following gifts: 1. To Judy she gave $48,000 in cash to pay Judy's medical bills 2. To Mark she gave a new car valued at $62,000 3. To Kristen she gave a $11,000 painting 4. To Louisiana State University she gave $25,000 to pay for Haley's tuition for the year Calculate Jordan's total taxable gifts for the current year.

$79,000

$82,000

$110,000

$121,000

$146,000

Question 101pts

Calculate Jordan's gift tax liability due for the current year.

$0

$32,800

$18,900

$44,000

Question 11pts

Which of the following is true concerning the 5/5 Lapse Rule?

The 5/5 Lapse Rule ensures that all transfers made to the trust by grantor annually are future interest gifts.

The 5/5 Lapse Rule only comes into play with a single beneficiary trust.

Amounts that lapse under the 5 and 5 Rule are income taxable to the trust beneficiaries

Gifts that exceed the 5 and 5 Lapse Rule are considered to be future interest gifts.

Question 21pts

Which of the following transfers would result in potential gift tax liability?

Bob pays $30,000 directly to his daughter's college for her fall semester tuition.

Elizabeth gifts $150,000 to her husband, Elroy, who is a U.S. citizen.

Adam gives his favorite employee, Aaron, a new car at Aaron's retirement that is paid for by Adam's company.

Naomi gives her sister $45,000 to assist with her medical expenses

Question 31pts

Which of the following transfers would not be considered a qualified transfer?

Piper pays $50,000 of her friend's medical expenses directly to the hospital.

Piper pays $35,000 to her niece so that she can pay her tuition. to Harvard University

Piper pays $10,000 to Children's Hospital for their annual fundraiser. Piper has received nothing in return.

Piper pays $12,000 to Prestigious Preparatory School for her nephew's tuition.

Question 41pts

Jose created a joint bank account for himself and his friend, Amparo. At what point has a gift been made to Amparo?

When the account is created.

When Jose notifies Amparo that the account has been created.

When Jose becomes an incapable person.

When Amparo writes a check against the account to pay her real estate taxes.

Question 51pts

Jane transferred a piece of real estate to her son Christopher 6 months ago. Jane purchased the real estate for $90,000 six years ago and the property was valued at $65,000 on the date of transfer. Jane paid $30,550 in gift tax on the transfer. All of the following statements are true, except:

If Christopher were to sell the property for $64,000 today, then the loss is a short-term loss.

Christopher will have a dual basis in the property, one for measuring gain, and another for measuring loss.

Christopher will need to pay income tax on the receipt of the real estate.

If Christopher sold the property for $120,000 after holding it for 5 years his gain would be $30,000.

Question 61pts

Maxwell died August 8, 2017. Of the following transfers made during his life, which is included in his gross estate?

The transfer of a whole life insurance policy on Maxwell's life to an irrevocable life insurance trust on September 16, 2015.

The sale of his term insurance policy to his brother, Donald, for fair market value on July 12, 2016.

The transfer of a whole life insurance policy on Maxwell's life (face value $150,000) valued at $20,000 to his son on July 16, 2014.

A gift of $14,000 to Maxwell's sister on August 7, 2017. No gift tax was due on the gift. This was the only transfer Maxwell made to his sister in 2017.

Question 71pts

Which of the following is not a reason that the proceeds of a life insurance policy would be included in a decedent's gross estate?

The proceeds of the policy may be used by the executor of his estate to pay administration expenses and death taxes.

The decedent transferred the ownership of the policy to his daughter six years before his death, but retained the right to borrow against the policy.

The decedent transferred the ownership of the policy to his son six months before his death.

The decedent transferred the ownership of the policy to an irrevocable life insurance trust 6 years ago.

Question 81pts

Which of the following statements relating to qualified transfers for gift tax purposes is not correct?

A qualified transfer does not take the relationship between the donor and the donee into account.

A payment made directly to an individual to reimburse him for medical expenses is a qualified transfer.

The exclusion for a qualified transfer is in addition to the annual exclusion.

A payment made to a qualified educational institution for tuition costs is a qualified transfer.

Question 91pts

Of the following statements, which is false?

The unlimited marital deduction is a deduction from a decedent's adjusted gross estate to arrive at the decedent's taxable estate. The unlimited marital deduction is limited to the value of the assets included in the decedent's gross estate which are transferred to the decedent's surviving spouse.

The credit for tax paid on prior transfers is available when a decedent passes away within ten years of having an inherited an asset from a decedent who predeceased her.

If the sum of a decedent's gross estate and lifetime adjusted taxable gifts is less than the applicable estate tax credit equivalency amount for the year of the decedent's death, the executor of the decedent's estate does not have to file an estate tax return.

Jesse gave his mom property valued at $100,000 six months before her death. Jesse's adjusted basis in the property was $45,000. Jesse was the sole heir of his mother's estate, and the same property was distributed from his mother's estate to him. At his mom's date of death, the property had a fair market value of $105,000. Jesse's adjusted basis in this property is $105,000.

Question 101pts

Rachel died several months ago (assume 01/05/2017) and her executor is finalizing her estate tax return. The executor has determined that Rachel's adjusted gross estate is $7,500,000 and that her estate is entitled to a charitable deduction in the amount of $500,000. Rachel did not make any adjusted taxable gifts during her lifetime. Calculate the net estate tax liability for Rachel's estate.

$0

$604,000

$2,745,800

$2,800,000