Real Estate Planning - Chapter 5

39 Questions | Total Attempts: 110

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Real Estate Quizzes & Trivia

Questions and Answers
  • 1. 
    Grandmother Joes contributed $2.5mm to a revocable trust.  She has a life expectancy of 24 years and she will receive an 8% per year annuity from the trust.  At her ddeather, the corpus will be paid to her granddaughter, Lisa.  What is Grandmother Jones's taxable gift?
    • A. 

      $0

    • B. 

      $2,094,752

    • C. 

      $2,489,000

    • D. 

      $2,500,000

  • 2. 
    Crystal loans Holly $650k, so that Holly can buy a home.  Holly signs a note, with a term of 5 years, promising to repay the loan.  The home is the collateral, but because Chrystal and Holly have been friends since childhood, Crystal does not charge Holly interest.  Which of the following statements is true?1) The imputed interest is considered a taxable gift from Crystal to Holly.2) The imputed interest is taxable income on Crystal's income tax return.3) The imputed interest is an interest expense deduction for Crystal.4) Holly can deduct the imputed interest on her income tax return.
    • A. 

      2 only

    • B. 

      2 and 4

    • C. 

      1, 2, and 4

    • D. 

      1, 2, 3, and 4

  • 3. 
    Timothy made the following transfers to his only daughter during the year:1) A bond portfolio with an adjusted basis of $130k and a fair market value of $140k.2) 2,000 shares of RCM Corp. stock with an adjusted basis of $126k and a FMV of $343k.3) An automobile with an adjusted basis of $15k and a fair market value of $9k.4) An interest-free loan of $2k for a personal computer on January 1st.  The applicable federal rate for the tax year was 8%.What is the value of Timothy's gross gifts for this year?
    • A. 

      $271,000

    • B. 

      $492,000

    • C. 

      $494,000

    • D. 

      $498,000

  • 4. 
    In the current year, Jerry loaned his daughter, Charisse, $14,000 to purchase a new car.  The loan was payable on demand, but there was no stated interest rate.  The applicable federal rate for the current year was 10%, and Charisse had $900 of net investment income for the year.  For gift tax purposes with regards to this loan, how much has Jerry gifted Charisse during the current year?
    • A. 

      $0

    • B. 

      $900

    • C. 

      $1,500

    • D. 

      $15,000

  • 5. 
    Pedro has begun a program of lifetime gifting.  All of the following statements regarding lifetime gifts are true, except?
    • A. 

      Appreciation on property after the date of the gift will not be subject to gift tax and will not be included in the donor's gross estate.

    • B. 

      Payments directly to his grandchildren for their education over the annual exclusion amount will not be taxable.

    • C. 

      Annual exclusion gifts will not be subject to the gift tax and will not be included in the donor's gross estate.

    • D. 

      The donee of income producing property will have to recognize the post-gift income from the property on the donee's income tax return.

  • 6. 
    Carl would like to make a gift to his son, but does not want the value of the gift and the associated gift tax to total an amount greater than $100,000.  Carl's cousin has told him about the net gift, but Carl has come to you for clarification.  Which of the following statements from Carl's cousin is correct?
    • A. 

      A net gift does not qualify for the annual exclusion because it is a gift of a future interest.

    • B. 

      Carl must prepay the gift tax due when he makes a net gift.

    • C. 

      A net gift requires Carl's son to disclaim the interest in the gift.

    • D. 

      Carl will have taxable income to the extent the gift tax paid is greater than his adjusted basis in the gifted property.

  • 7. 
    Which of the following is eligible for the annual exclusion?
    • A. 

      Frank designates his daughter, Holly, beneficiary of his 401(k) plan.

    • B. 

      Frank designates his wife, Betty, as beneficiary of his life insurance policy.

    • C. 

      Frank funds an irrevocable trust with $1,100,000 for the benefit of his son. The terms of the trust allow a payout at the discretion of the trustee.

    • D. 

      Frank funds an irrevocable life insurance trust with the amount necessary to pay the premiums of the policy. The beneficiaries can take a distribution equal to the contribution each year.

  • 8. 
    After reading an estate planning article in a popular magazine, Vaughn has decided to take action to reduce his gross estate by making annual gifts to his 4 kids, 8 grandchildren, and 4 great-grandchildren.  Vaughn has discussed the gifting strategy with his wife, Rebecca, and provided it does not result in use of any of her applicable gift tax credit, she has agreed to split each gift.  Vaughn does not want to use his applicable gift tax credit either.  If Vaughn carries the plan out for 5 years, how much can he gift in totoal while meeting Rebecca's requirement?  Assume the 2014 exclusion amounts.
    • A. 

      $208,000

    • B. 

      $1,120,000

    • C. 

      $2,080,000

    • D. 

      $2,240,000

  • 9. 
    Mary and Emile would like to give the maximum possible gift that they can to their son without having to pay gift tax.  Mary and Emile have never filed a gift tax return and lie in a community-property state.  How much can they transfer in 2014 to their son free of gift tax?
    • A. 

      $28,000

    • B. 

      $2,081,800

    • C. 

      $5,368,000

    • D. 

      $10,708,000

  • 10. 
    Celeste and Raymond have been married for 29 years.  Last year, Raymond sold his extremely successful automotive repair shop and his net worth now exceeds $10MM dollars.  Celeste and Raymond have twin daughters, Kelly and Shelly, who will be 35 next month.  Celeste and Raymond, neither of whom have given any gifts in the past, would like to give their daughters the maximum amount of cash possible without paying any  gift tax.  How much can Celeste and Raymond give to Kelly and Shelly during 2014? 
    • A. 

      $14,000

    • B. 

      $28,000

    • C. 

      $5,368,000

    • D. 

      $10,736,000

  • 11. 
    Deborah provides the following list to her CPA who is preparing her gift tax return.  Which of the following will Deborah's CPA include as a taxable gift on Deborah's gift tax return?
    • A. 

      Payment to grandmother of $20,000 to help her with her medical bills.

    • B. 

      Payment to Doctor's Hospital for $35,000 to cover the medical bills of a friend.

    • C. 

      Payment to Northshore Medical School for $17,000 to cover nephew's tuition.

    • D. 

      Payment to child of $6,000 that represents legal support.

  • 12. 
    Celeste made the following transfers during 2014:1) Her friend, Paul, needed $24,000 to begin law school.  Celeste gave Paul the cash.2) An alimony payment of $14,000 to her ex-husband.3) She paid $15,000 to Diamond Shores Hospital for her friend Jackie's medical bills.What is the amount of Celeste's taxable gifts?
    • A. 

      $10,000

    • B. 

      $12,000

    • C. 

      $27,000

    • D. 

      $50,000

  • 13. 
    While completing Joelle's tax returns, Joelle's CPA asked her if she made any gifts during the year.  Joelle faxed her the following information.  Of the following, which would not require the filing of a gift tax return?
    • A. 

      Joelle created a revocable trust under the terms of which her son is the income beneficiary for his life and her grandson is the remainder beneficiary. Joelle created the trust with a $6,000,000 contribution and the trust made an income distribution in the current year.

    • B. 

      Joelle opened a joint checking account in the name of herself and her sister with $75,000. The day after Joelle opened the account, her sister withdrew $35,000 to purchase a car.

    • C. 

      Joelle created an irrevocable trust giving a life estate to her husband and a remainder interest to her daughter. Joelle created the trust with a $1,000,000 contribution.

    • D. 

      Joelle gave her husband one half of an inheritance she received from her uncle. The inheritance was $3,000,000.

  • 14. 
    During 2014, Janice made the following transfers.  What is the a amount of her total taxable gifts for 2014?1) Janice gave $10,000 to her boyfriend so he could buy a new car.2) Janice's neighbor Judy needed $15,000 to pay for her knee surgery, Janice paid Doctors-R-US Hospital directly.3) Her nephew began attending Georgetown Law School this year.  Janice made the initial yearly tuition payment of $25,000 directly to Georgetown Law School during 2014.
    • A. 

      $0

    • B. 

      $14,000

    • C. 

      $15,000

    • D. 

      $50,000

  • 15. 
    Brent and his wife live in a common law (separate property) state.  Each year, Brent makes gifts equal to the annual exclusion to his three children.   During the year, he comes to you looking for a way to transfer more than $75,000 each year to his kids without using his applicable gift tax credit or paying any gift tax.  All of the following statements regarding gift-splitting, are true, except:
    • A. 

      If Brent's wife would agree to elect gift splitting, Brent could transfer $84,000 per year to his kids without utilizing his applicable gift tax credit or paying any gift tax.

    • B. 

      Even if Brent's wife elected to split gifts, only Brent's gifts would be split.

    • C. 

      Even though all of the gifts are less than the annual exclusion, and not taxable, Brent will have to file a gift tax return if his wife agrees to gift split.

    • D. 

      If a couple elects to split gifts, all gifts made during the year (while the couple is married) by either spouse must be split.

  • 16. 
    During the year, Sean made the following gifts to his daughter:1) An interest-free loan of $6,000 to purchase an SUV.  The applicable federal rate was 6%.  The loan has been outstanding for two years.2) A corporate bond with an adjusted basis of $14,000 and a fair market value of $16,000.3) A portfolio of stock with an adjusted basis of $10,000 and a fair market value of $25,000.Seans's wife agrees to elect gift-splitting for the year, but she did not make any gifts of her own.  What is the amount of total taxable gifts made by Sean during the year?
    • A. 

      $6,500

    • B. 

      $7,500

    • C. 

      $7,680

    • D. 

      $20,680

  • 17. 
    Donna and Daniel have lived in Louisiana their entire marriage.  Currently, their combined net worth is $4MM and all of their assets are community property.  After meeting their financial advisor, Donna and Daniel begin a plan of lifetime gifting to reduce their gross estates.  During 2014, they made the following cash gifts:Son                 $80,000Daughter         $160,000Republican Natl. Committee   $75,000Granddaughter    $15,000What is the amount of the taxable gifts to be reported by Donna?
    • A. 

      $35,500

    • B. 

      $92,000

    • C. 

      $127,500

    • D. 

      $255,000

  • 18. 
    Jason and his wife, Maria, live in Texas with their two minor children.  All of their property is owned as community property.   During the year, Jason gave his brother a $13,000 car, his friend a $4,000 watch, and his dad a $45,000 fishing boat.  What is the total amount of split gifts?
    • A. 

      $0

    • B. 

      $16,000

    • C. 

      $31,000

    • D. 

      $62,000

  • 19. 
    Which of the following statements about James and Carly who are married, regarding the rules of the federal gift tax return is incorrect?
    • A. 

      James made a gift to his brother of $20k from his separate property. Carly, James' wife, agreed to elet gift-splitting. Only James will be required to file a gift tax return.

    • B. 

      Carly made a gift to her sister of $18k from community property. Because it is community property, Carly and James are each deemed to have made a gift of $9k.

    • C. 

      A gift tax return is due 3 1/2 months after the end of the donor's tax year-end but is extended by extending the personal return.

    • D. 

      Carly and James filed an extension to file their federal income tax return. To extend any gift tax returns due for the year, Carly and James must file a gift tax return extension.

  • 20. 
    Randy transferred property with a fair market value of $56k to his brother, Robbie.  Randy's adjusted basis in the property was $23k.  Of the following statements related to this transfer, which is correct?
    • A. 

      Robbie has an adjusted basis in the property of $0

    • B. 

      Randy must recognize a capital gain on this transfer of $33k.

    • C. 

      If Robbie subsequently sells the property for $60k, he will have a capital gain of $4k.

    • D. 

      Randy has a taxable gift to Robbie of $42k.

  • 21. 
    Stephanie received 100 shares of ZYX Corporation from her aunt with an adjusted basis of $60k and a fair market value of $30k as of the date of the gift.  Her Aunt paid $1,500 of gift tax.  Stephanie sold the stock for $45k.  What is Stephanie's recognized gain or loss?
    • A. 

      No gain or loss.

    • B. 

      $15,000 gain

    • C. 

      $15,000 loss

    • D. 

      $13,500 loss

  • 22. 
    Jack gave his nephew, Stephen, 1,000 shares of ABC Corporation.  Jack had an adjusted basis of $10,000 for all 1,000 shares and the fair market value at the date of the gift was $45,000.  Jack paid gift tax of $9,000 on the gift to Stephen.  If Stephen sells the stock three days after receiving the gift for $46,000, what is his capital gain/loss?  (Assume Jack had already made transfers to Stephen during the year to utilize the annual exclusion.)
    • A. 

      No gain or loss.

    • B. 

      $1,000 gain

    • C. 

      $29,000 gain

    • D. 

      $36,000 gain

  • 23. 
    If John pays Carol's car note, and there is no consideration from Carol to John, John has made a gift to Carol.
    • A. 

      True

    • B. 

      False

  • 24. 
    The lender of a $150k no-interest gift loan will always impute interest.
    • A. 

      True

    • B. 

      False

  • 25. 
    The donee of a gift is primarily liable for any gift tax due on the transfer.
    • A. 

      True

    • B. 

      False

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