51. A gratuitous transfer of property made during the lifetime of the donor is called:
A. an incomplete gift.
B. a testamentary transfer.
C. a taxable gift.
D. an inter vivos transfer.
E. All of these.
52. The unified credit is designed to:
A. apply only to taxable transfers included in the gross estate.
B. prevent taxation of cumulative transfers that do not exceed a certain minimum amount.
C. apply to amounts not already eliminated by the exemption equivalent.
D. exclude up to $1 million for any individual transfer.
E. None of these.
53. The estate and gift taxes share several common features. Which of the following characteristics are
common to both the estate and gift taxes?
A. A unified credit and a marital deduction.
B. A charitable deduction and an annual exclusion.
C. A gift-splitting election and a deduction for income taxes paid by the fiduciary.
D. A charitable deduction and the unused spousal exemption equivalent.
E. All of these are characteristics common to both the gift and the estate tax.
54. 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.
55. Which of the following statements is(are) true for both gratuitous and testamentary transfers?
A. A unified credit of up to $1 million reduces the tax on any transfer.
B. An annual exclusion offsets any transfer up to $12,000.
C. An election can be made to split a transfer between spouses.
D. A charitable and a marital deduction are allowed in computing the taxable transfer.
E. All of these are true.
56. The estate and gift taxes share several common features. Which of the following characteristics is
common to both the estate and gift taxes?
A. A marital deduction and a deduction for casualty losses.
B. A marital deduction for transfers of all terminable interests.
C. The tax rate schedule for calculating gross transfer taxes.
D. A charitable deduction and an annual exclusion.
E. None of these list characteristics common to both the gift and the estate tax.
57. Which of the following is a true statement about the Federal gift tax return (Form 709)?
A. Form 709 is due by the 15th day of the ninth month following the date of the gift.
B. Form 709 must be filed if a taxpayer wishes to elect gift splitting. C. Form 709 need not be filed unless a taxpayer's taxable gifts exceed the exemption equivalent.
D. Form 709 is due nine months after the death of the decedent.
E. None of these is true.
58. Which of the following transfers is a completed gift?
A. Payment of child support by a former spouse.
B. Transfer of property to a revocable trust.
C. Transfer of cash to a bank account held in joint tenancy with the right of survivorship.
D. Income paid to the beneficiary of a revocable trust.
E. None of these is a completed gift.
59. Which of the following transactions would not utilize the "Section 7520 rate" to calculate the value of
the transfer?
A. A transfer of property with a retained life estate.
B. A transfer of property to a spouse.
C. A transfer of a remainder interest in real property.
D. A transfer of a 10-year term certain in real property.
E. None of these utilizes the "Section 7520 rate" in the calculation of the value of the property.
60. The calculation of the value of a life estate in a trust generally does not depend upon which of the
following factors?
A. the age of the life tenant.
B. the Section 7520 interest rate.
C. the value of the property at the time of the transfer.
D. the manner in which the trust corpus is invested.
E. All of these.
61. This year Anthony transferred $250,000 of bonds to a trust with directions to the trustee to pay
income to his son for the next 20 years. After 20 years the trust corpus would revert to Anthony. Which
of the following is a true statement?
A. Anthony has made a $250,000 gift.
B. Anthony has made a $237,000 taxable gift.
C. Anthony has not yet made a completed gift.
D. Anthony has made a completed gift of the income interest only.
E. None of these is true.
62. Natalie transferred $500,000 of bonds to a revocable trust with directions to the trustee to pay
income to her aunt for five years after which the corpus is to be distributed to Natalie's niece. At year
end, the trustee paid $15,000 of income to the aunt. Which of the following is a true statement?
A. Natalie has made a completed gift of $500,000.
B. Natalie has made a taxable gift of $1,000.
C. Natalie has not made a completed gift because the trust is revocable.
D. Natalie has made a taxable gift of $474,000.
E. None of these.
63. Which of the following is a completed taxable gift?
A. $20,000 in cash contributed to the committee to reelect Senator BlowHard.
B. $15,000 in cash given to Valley Hospital for the care of a neighbor who was in an auto accident. C. $18,000 in cash given to a needy student to pay for college tuition.
D. $55,000 in cash transferred to a former spouse under a written property settlement shortly after a
divorce.
E. None of these is a completed taxable gift.
64. This year Don and his son purchased real estate for an investment. The price of the property was
$500,000, and the title named Don and his son as joint tenants with the right of survivorship. Don
provided $320,000 of the purchase price and his son provided the remaining $180,000. Has Don made a
taxable gift and, if so, in what amount?
A. Don has made a taxable gift of $236,000.
B. Don has made a taxable gift of $70,000.
C. Don has made a taxable gift of $22,000.
D. Don has made a taxable gift of $56,000.
E. None of these - Don did not make a taxable gift.
65. This year Brent purchased season baseball tickets in the exclusive sky club. The price of the tickets
was $60,000, and Brent divided the tickets equally with his two brothers. Has Brent made a taxable gift
and, if so, in what amount?
A. Brent made a taxable gift of $46,000.
B. Brent made two taxable gifts of $17,000 each.
C. Brent transferred the tickets for love and affection so no gift tax is imposed.
D. Brent made two taxable gifts of $6,000.
E. None of these.
66. Christian transferred $60,000 to an irrevocable trust for the benefit of his three daughters. The three
daughters share income equally for five years and then the corpus of the trust is to be divided equally
between them. What is the amount of the taxable gifts, if any, made by Christian?
A. $60,000
B. $47,000
C. $34,000
D. $21,000
E. None of these - the amount of the taxable gifts cannot be ascertained without valuing each income
interest.
67. This year Samantha gave each of her three nephews birthday gifts of $10,000 in cash. At Christmas,
Samantha gave each of her three nephews Christmas gifts of an additional $5,000 in cash. What is the
amount of the taxable gifts, if any, made by Samantha this year?
A. $3,000
B. $32,000
C. $45,000
D. zero - none of the gifts exceed the annual exclusion.
E. None of these.
68. Jonathan transferred $90,000 of cash to a trust this year for the benefit of Hannah, age 10. The
trustee has the discretion to distribute income or corpus (principal) for Hannah's benefit and is required
to distribute all assets to Hannah (or her estate) not later than Hannah's 21st birthday. What is the
amount of the taxable gift?
A. $90,000 B. $76,000
C. $64,000
D. zero - there is no completed gift until the trustee makes a distribution from the trust.
E. None of these.
69. Matthew and Addison are married and live in Michigan, a common-law state. For the holidays
Addison gave cash gifts of $30,000 to each of her two sons, and Matthew gave $40,000 to his daughter.
What is the amount of Addison's taxable gifts if Matthew and Addison opt to gift split?
A. $58,000
B. $8,000
C. $16,000
D. $4,000
E. None of these
70. Andrew and Brianna are married and live in Texas, a community property state. For their birthdays
this year Andrew gave cash gifts of $20,000 to each of his two daughters, and Brianna gave $30,000 to
her niece. What is the amount of Andrew's taxable gifts?
A. $1,000
B. $14,000
C. $28,000
D. zero if Andrew and Brianna elect to split gifts.
E. None of these.
71. Jayden gave Olivia a ring when she agreed to marry him. The ring is a family heirloom valued at
$67,000. What is the amount of the taxable gift?
A. zero - the marital deduction offsets the gift as long as Jayden and Olivia are married by year end.
B. $53,000
C. $67,000
D. zero - this transfer is not gratuitous.
E. None of these.
72. 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?
A. $386,000
B. $59,000
C. $374,000
D. $324,000
E. None of these.
73. This year Nathan transferred $2 million to an irrevocable trust established for the benefit of his
nephew. The trustee is directed to accumulate income for the next 5 years before distributing the trust
corpus to Nathan's nephew. In past years Nathan has made taxable gifts of $6 million and used a unified
credit on an exemption equivalent of $5 million. What amount of gift tax, if any, must Nathan remit?
A. $300,000
B. $400,000
C. $345,450
D. zero - there is a $10.68 million exemption equivalent E. None of these. The amount of tax cannot be estimated without the use of a tax rate schedule.
74. At his death Trevor had a probate estate consisting of $4 million of property. Which of the following
is a true statement about Trevor's estate or estate tax?
A. Trevor must have a taxable estate of at least $4 million.
B. Trevor must have an adjusted gross estate of at least $4 million.
C. Trevor must have an estate tax base (cumulative taxable transfers) of at least $4 million.
D. Trevor must have a gross estate of at least $4 million.
E. None of these is necessarily true.
75. At his death Titus had a gross estate consisting of $6 million of property. Which of the following is a
true statement about Titus' estate or estate tax?
A. Titus must have a probate estate of at least $6 million.
B. Titus must have an adjusted gross estate of at least $6 million.
C. Titus must have cumulative taxable transfers of at least $6 million.
D. Titus must have a tentative transfer tax calculated on at least $2 million of transfers.
E. None of these is necessarily true.
76. At her death Tricia had an adjusted gross estate consisting of $8 million of property. Which of the
following is a true statement about Tricia's estate or estate tax?
A. Tricia must have a taxable estate over $8 million.
B. Tricia's taxable estate will not exceed $8 million.
C. Tricia must have a probate estate tax of zero.
D. Tricia must have a gross estate tax of zero.
E. None of these is necessarily true.
77. At her death Tricia owned a life insurance policy on her life that paid her daughter $500,000 upon her
death. The policy was only valued at $25,000 prior to Tricia's death. What amount, if any, is included in
Tricia's gross estate?
A. $500,000
B. $25,000
C. $25,000 if Tricia transferred ownership of the policy within three years of her date of death.
D. zero - life insurance proceeds due to the death of the decedent are not included in the decedent's
gross estate.
E. zero if Tricia's daughter refused to accept the proceeds.
78. At her death Siena owned real estate worth $200,000 that was titled with her sister in joint tenancy
with the right of survivorship. Siena contributed $50,000 to the total cost of the property and her sister
contributed the remaining $75,000. What amount, if any, is included in Siena's gross estate?
A. $50,000
B. $125,000
C. $80,000
D. $100,000
E. None of these is correct.
79. At his death Tyrone's life insurance policy paid his estate $85,000. What amount, if any, is included in
Tyrone's gross estate?
A. $85,000 B. $85,000 if Tyrone had an incident of ownership of the policy at the time of his death.
C. zero if Tyrone did not transfer any ownership of the policy within three years of his date of death.
D. zero - life insurance proceeds due to the death of the decedent are not included in the gross estate.
E. zero if Tyrone's estate uses the insurance proceeds to pay Tyrone's estate tax.
80. At his death Stanley owned real estate worth $345,000 with two other individuals as equal tenants in
common. Stanley contributed $50,000 to the $100,000 total cost of the property. What amount, if any, is
included in Stanley's gross estate?
A. $50,000
B. $172,500
C. $345,000
D. $115,000
E. None of these is correct.
81. At her death Serena owned real estate worth $210,000 with her spouse in joint tenancy with the
right of survivorship. Serena contributed $50,000 to the original cost of the property and her spouse
contributed the remaining $100,000. What amount, if any, is included in Serena's gross estate?
A. $50,000
B. $105,000
C. $80,000
D. zero - this property qualifies for the marital deduction.
E. None of these is correct.
82. Harold and Mary are married and live in a community property state. During the marriage Harold
bought a parcel of real estate for $100,000 in community funds and titled the property in his name
alone. Mary died on January 30th of this year and was survived by Harold who did not remarry. The
parcel of real property was worth $250,000 on January 30th of this year but was only worth $220,000 at
year end. What amount, if any, is included in Mary's gross estate?
A. $250,000
B. $220,000
C. $125,000
D. $110,000
E. zero - Mary had no ownership interest in the property at her death.
83. At his death Jose owned real estate worth $22 million but subject to a mortgage of $7 million. Which
of the following is a true statement?
A. $22 million is included in Jose's gross estate.
B. $15 million is included in Jose's gross estate.
C. The $7 million mortgage must be paid by Jose's estate.
D. The $7 million mortgage is not deductible if Jose's will transfers the property to a charity.
E. All of these
84. At her death Emily owned real estate worth $2.5 million and other property worth $1 million.
Property taxes of $200,000 were accrued on the real estate at the time of Emily's death. Which of the
following is a true statement?
A. Emily's gross estate is $3.3 million.
B. Emily's taxable estate is $3.5 million.
C. Emily's adjusted gross estate is $3.3 million. D. Emily's estate tax base is $3.5 million.
E. None of these is true.
85. Which of the following is a true statement?
A. Executor's fees paid by an estate are deductible in computing the gross estate.
B. Funeral expenses for the decedent paid by an estate are deductible in computing the adjusted gross
estate.
C. An executor can choose to deduct the decedent's funeral expenses on either the estate tax return or
the estate's income tax return.
D. An executor can only deduct the costs of administering the decedent's estate on the estate's income
tax return.
E. None of these is true.
86. The executor of Isabella's estate incurred administration expenses of $32,000 and paid $5,000 in
funeral expenses. The executor charged the estate for $24,000 in fees. What is the maximum amount
Isabella's estate can deduct in computing the adjusted gross estate?
A. $32,000
B. $37,000
C. $56,000
D. $61,000
E. None of these.
87. Christopher's residence was damaged by a storm during the administration of his estate.
Christopher's executor paid $120,000 to repair the residence after the storm. Which of the following is a
true statement?
A. A casualty loss of $120,000 can be deducted on Christopher's final individual income tax return.
B. The casualty loss deduction is limited to the loss in excess of 10 percent of Christopher's AGI.
C. Christopher's executor has the option of deducting a loss of $120,000 on the estate tax return or on
the estate's income tax return.
D. No casualty loss deduction is available for calculating the estate tax.
E. None of these is true.
88. Chloe's gross estate consists of the following property valued at the date of death:
Chloe's real estate is encumbered by a mortgage of $450,000, and Chloe's executor paid her funeral
costs of $6,000 and charged fees for $24,000. Which of the following is a true statement?
A. Chloe's adjusted gross estate is at least $7,020,000.
B. Chloe's taxable estate is at least $7,020,000.
C. Chloe's taxable estate is $7,050,000.
D. Chloe's estate will calculate the tentative estate tax on $7.5 million.
E. None of these is true.
89. Tracey is unmarried and owns $7 million in stock and bonds. What is the result if Tracey dies this year
and leaves all of her property to a qualified charity?
A. Tracey's gross estate will be zero.
B. Tracey's estate tax basis will be zero.
C. Tracey's taxable estate will be zero.
D. Tracey's estate will have a tentative estate tax of zero.
E. None of these. 90. Madison was married at the time of her death and her gross estate consisted of $22 million in stock
and bonds. Madison left all of her property to her spouse. What is the result?
A. Madison's taxable estate will be zero.
B. Madison's surviving spouse will have an income tax basis in the inherited property of zero.
C. Madison's adjusted gross estate will be zero.
D. Madison's estate will have a tentative estate tax of zero.
E. None of these.
91. Which of the following is a true statement?
A. A remainder interest held by the decedent at the time of death is not included in the decedent's gross
estate.
B. The value of a remainder interest depends in part on the Section 7520 interest rate at the time of
death.
C. The value of a remainder interest in a life estate is independent of the age of the life tenant.
D. The value of a life estate does not depend upon the age of the life tenant.
E. None of these is true.
92. Ethan owned a vacation home at the time of his death. Which of the following is a true statement if
Ethan was married to Emma and resided in a common law state at the time of his death?
A. Ethan can claim a marital deduction for the vacation home if he bequeaths it to Emma.
B. Ethan cannot claim a marital deduction if he bequeaths a life estate in the vacation home to Emma.
C. Ethan can claim a marital deduction for half the value of the vacation home if it was owned with
Emma in joint tenancy with the right of survivorship.
D. Ethan can claim a charitable deduction if he bequeaths it to a qualified charity.
E. All of these are true.
93. Adjusted taxable gifts are added to the taxable estate to accomplish which of the following
objectives?
A. Prevent double taxation of previously taxed gifts.
B. Increase the marginal tax rate on previously taxed gifts.
C. Increase the marginal tax rate on the taxable estate.
D. Remove inter vivos transfers from cumulative taxable transfers.
E. None of these.
94. A unified credit is subtracted in calculating both the gift tax and the estate tax. Why doesn't this
calculation have the effect of increasing the total unified credit amount?
A. The tentative estate tax is reduced by only taxes payable on adjusted taxable gifts rather than gross
gift taxes.
B. The unified credit only offsets the exemption equivalent.
C. The unified credit cannot be used to offset gift taxes on adjusted taxable gifts.
D. The unified credit varies in amount from year to year.
E. None of these.
95. The generation-skipping tax is designed to accomplish which of the following?
A. generate additional revenues to supplement the estate tax.
B. prevent the avoidance of transfer taxes (both estate and gift tax) through transfers that skip a
generation of recipients.
C. eliminate the possibility that the estate tax can be avoided by gifts in contemplation of death. D. replace the gift tax on distributions from trusts.
E. None of these.
96. Which of the following is a true statement?
A. A fiduciary entity is a legal entity that takes possession of property for the benefit of a person.
B. An estate is a fiduciary that comes into existence upon a person's death to transfer the decedent's real
and personal property.
C. A trust is also a fiduciary whose purpose is to hold and administer the corpus for other persons
(beneficiaries).
D. An estate exists only temporarily, but a trust may have a prolonged or even indefinite existence.
E. All of these are true.
97. Which of the following is a true statement?
A. A serial gift strategy utilizes inter vivos gifts to multiple donees over multiple years to maximize the
annual exclusion.
B. A serial gift strategy works well even if the gifts don't qualify as present interests.
C. A bypass trust avoids all estate taxes on the estate of the first spouse to die.
D. The income tax savings from holding appreciated property until death is always outweighed by the
additional estate tax imposed on the property.
E. None of these is true.
98. Which of the following is a true statement?
A. Leaving all property to the surviving spouse maximizes the marital deduction and therefore minimizes
total transfer taxes on the estates of both spouses.
B. A bypass provision in the will of the deceased spouse is designed to use the unified credit of the
deceased spouse by transferring property to beneficiaries other than the surviving spouse.
C. Serial gifts are limited in scope because only $10,000 can be transferred each year tax-free to any
specific donee
D. Serial gifts can move significant amounts of wealth only if employed by multiple donors
E. None of these is true.

 

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