Test Bank For Corporate Partnership Estate and Gift Taxation
2021 1st Edition Pratt 9781617407901 | All Chapters with
Answers and Rationals
An inter vivos transfer triggers ____. A testamentary transfer triggers ____. - ANSWER: a gift tax; an
estate tax
When a taxpayer transfers property to a trust, what are the two types of interest transferred? How is
it treated for tax purposes. - ANSWER: Income interest and remainder interest. Treated as a gift.
What are the income interest and remainder interest? - ANSWER: Income interest - when the
beneficiary receives income from the transferred property
Remainder interests - when the beneficiary receives the corpus (the property by itself) once the trust
terminates
______ is(are) treated as income to recipients.
a) gifts
b) inheritances
c) both A and B
d) neither A nor B - ANSWER: D
A donor gifted property to a donee, and a donee refused the gift. How is this treated for tax
purposes? - ANSWER: It is not treated as a gift because the donee has to accept it.
The creation of a joint ownership interest without equal consideration from each co-owner is
considered what for tax purposes? - ANSWER: A gift
John purchases real estate for $50,000 and this property is owned by John and his son as tenants in
common (one half interest each). What is the gift amount that John is taxed on? What if the son
contributed $10M? - ANSWER: $25M; $15M ($25M-10M)
What are the exceptions to the taxation of gifts? - ANSWER: 1) Payment of another person's medical
or educational expenses (tuition and fees only), must be paid directly to the provider or educational
institution
2) Political contributions
3) satisfaction of an obligation
4) transfer to civic leagues and social welfare organizations, labor, agricultural, or horticultural
organizations, and business leagues
Which of the following are considered gifts?
1) Cash and property transfers
2) Payments to employees that in substance are compensation for personal services
3) Debt forgiveness to family members
4) Sales at bargain prices to family members
5) Donations of personal services
6) Transfers that can be revoked
7) Loans to family members at bargain interest rates
8) Payments to minor family members for food, clothing, and other reasonable support needs
9) Payments for education and medical expenses that are paid directly to the institution
, 10) Political contributions
11) Transfer of property into trust for the benefit of others
12) Property settlements incident to divorce - ANSWER: 1) Cash and property transfers
3) Debt forgiveness to family members
4) Sales at bargain prices to family members
7) Loans to family members at bargain interest rates
11) Transfer of property into trust for the benefit of others
Is a $5,000 child support payment a gift? - ANSWER: No, because it is an obligation.
What is the annual gift exclusion? - ANSWER: $15,000. You don't have to report this to the IRS.
What is required for the $15M gift exclusion to apply? - ANSWER: The donee has a "present interest"
in the property.
What are the two unlimited deductions for both estates and gifts? - ANSWER: Marital deduction for
transfers to spouse and charitable contributions deduction for a transfer to a charity
What is the unified tax credit? - ANSWER: Allows for the transfer of up to $11,180,00 of estates and
gifts before being taxed. It is a lifetime credit, in that it accumulates throughout your life.
John is married to Sarah and this year made a gift of $50,000 to his son. If John and Sarah elect to gift
splitting, how much of the gift is taxable? - ANSWER: Each spouse qualifies for the $15M exclusion, so
they will both show as having made a reportable gift of $10M.
Huey and Wonetta became engaged in April, when Harry gave Wonetta a ring with a value of $50,000.
In July, Huey and Wonetta were married and Huey gave Wonetta a new car worth $75,000. How are
these treated for tax purposes? - ANSWER: The $75,000 is a marital deduction, and $15M is excluded.
The remaining $35M is taxable.
John donated $60M to his church. What are the tax consequences? -
What is the gift tax calculation formula? - A
Earl made a $40,000 cash gift to his uncle this year. Earl was married throughout the year and elected
with his spouse to gift split. How much of the gift will be taxable? -
Dan transferred property worth $20,000 to a trust with the income to be paid to his 22 year old niece.
After the niece reaches age 30, the remainder interest is to be distributed to Dan's brother. Indicate
whether the income and remainder interests are present or future interests. - ANSWER: No taxable
gift was made because the church is a charity.
NSWER: 1) Determine current taxable gifts (gifts reduced by exclusions and deductions)
2) Add previous taxable gifts and calculate the total gift tax
3) Reduce the total gift tax by the gift tax computed on taxable gifts from previous periods using the
current rates for the unified tax
4) Reduce any remaining gift tax by the unused portion of the unified credit
ANSWER: $40,000 - $30,000 = $10,000
ANSWER: Income - present
Remainder - future
ANSWER: No. If it is revocable it is not a gift.
John created a $500,000 trust that provided his mother with an income interest for her life and his
sister with the remainder interest at the death of his mother. John expressly retained the power to
revoke both the income interest and the remainder interest at any time. Is this considered a gift for
tax purposes? -
What is the right to survivorship? - ANSWER: When a property is owned by joint tenants, the interest
of a deceased owner gets transferred to the remaining surviving owners.
2021 1st Edition Pratt 9781617407901 | All Chapters with
Answers and Rationals
An inter vivos transfer triggers ____. A testamentary transfer triggers ____. - ANSWER: a gift tax; an
estate tax
When a taxpayer transfers property to a trust, what are the two types of interest transferred? How is
it treated for tax purposes. - ANSWER: Income interest and remainder interest. Treated as a gift.
What are the income interest and remainder interest? - ANSWER: Income interest - when the
beneficiary receives income from the transferred property
Remainder interests - when the beneficiary receives the corpus (the property by itself) once the trust
terminates
______ is(are) treated as income to recipients.
a) gifts
b) inheritances
c) both A and B
d) neither A nor B - ANSWER: D
A donor gifted property to a donee, and a donee refused the gift. How is this treated for tax
purposes? - ANSWER: It is not treated as a gift because the donee has to accept it.
The creation of a joint ownership interest without equal consideration from each co-owner is
considered what for tax purposes? - ANSWER: A gift
John purchases real estate for $50,000 and this property is owned by John and his son as tenants in
common (one half interest each). What is the gift amount that John is taxed on? What if the son
contributed $10M? - ANSWER: $25M; $15M ($25M-10M)
What are the exceptions to the taxation of gifts? - ANSWER: 1) Payment of another person's medical
or educational expenses (tuition and fees only), must be paid directly to the provider or educational
institution
2) Political contributions
3) satisfaction of an obligation
4) transfer to civic leagues and social welfare organizations, labor, agricultural, or horticultural
organizations, and business leagues
Which of the following are considered gifts?
1) Cash and property transfers
2) Payments to employees that in substance are compensation for personal services
3) Debt forgiveness to family members
4) Sales at bargain prices to family members
5) Donations of personal services
6) Transfers that can be revoked
7) Loans to family members at bargain interest rates
8) Payments to minor family members for food, clothing, and other reasonable support needs
9) Payments for education and medical expenses that are paid directly to the institution
, 10) Political contributions
11) Transfer of property into trust for the benefit of others
12) Property settlements incident to divorce - ANSWER: 1) Cash and property transfers
3) Debt forgiveness to family members
4) Sales at bargain prices to family members
7) Loans to family members at bargain interest rates
11) Transfer of property into trust for the benefit of others
Is a $5,000 child support payment a gift? - ANSWER: No, because it is an obligation.
What is the annual gift exclusion? - ANSWER: $15,000. You don't have to report this to the IRS.
What is required for the $15M gift exclusion to apply? - ANSWER: The donee has a "present interest"
in the property.
What are the two unlimited deductions for both estates and gifts? - ANSWER: Marital deduction for
transfers to spouse and charitable contributions deduction for a transfer to a charity
What is the unified tax credit? - ANSWER: Allows for the transfer of up to $11,180,00 of estates and
gifts before being taxed. It is a lifetime credit, in that it accumulates throughout your life.
John is married to Sarah and this year made a gift of $50,000 to his son. If John and Sarah elect to gift
splitting, how much of the gift is taxable? - ANSWER: Each spouse qualifies for the $15M exclusion, so
they will both show as having made a reportable gift of $10M.
Huey and Wonetta became engaged in April, when Harry gave Wonetta a ring with a value of $50,000.
In July, Huey and Wonetta were married and Huey gave Wonetta a new car worth $75,000. How are
these treated for tax purposes? - ANSWER: The $75,000 is a marital deduction, and $15M is excluded.
The remaining $35M is taxable.
John donated $60M to his church. What are the tax consequences? -
What is the gift tax calculation formula? - A
Earl made a $40,000 cash gift to his uncle this year. Earl was married throughout the year and elected
with his spouse to gift split. How much of the gift will be taxable? -
Dan transferred property worth $20,000 to a trust with the income to be paid to his 22 year old niece.
After the niece reaches age 30, the remainder interest is to be distributed to Dan's brother. Indicate
whether the income and remainder interests are present or future interests. - ANSWER: No taxable
gift was made because the church is a charity.
NSWER: 1) Determine current taxable gifts (gifts reduced by exclusions and deductions)
2) Add previous taxable gifts and calculate the total gift tax
3) Reduce the total gift tax by the gift tax computed on taxable gifts from previous periods using the
current rates for the unified tax
4) Reduce any remaining gift tax by the unused portion of the unified credit
ANSWER: $40,000 - $30,000 = $10,000
ANSWER: Income - present
Remainder - future
ANSWER: No. If it is revocable it is not a gift.
John created a $500,000 trust that provided his mother with an income interest for her life and his
sister with the remainder interest at the death of his mother. John expressly retained the power to
revoke both the income interest and the remainder interest at any time. Is this considered a gift for
tax purposes? -
What is the right to survivorship? - ANSWER: When a property is owned by joint tenants, the interest
of a deceased owner gets transferred to the remaining surviving owners.
