Question

Identify which of the following statements is false

A. Regardless of how large the gross estate is, the estate tax liability can be completely eliminated if the estate is willed to a charitable organization.      
B. The Lifetime Exemption applies only to gifts given.
C. Casualty or theft losses incurred during the administration of the estate are deductible on the estate tax return.
D. The estate tax return is due, ignoring extensions, 9 months after the decedent's date of death.   

Which of the following transactions constitutes a taxable gift made by Ellen, a widow, in the current year?      
A. Ellen transfers $60,000 to a bank account with Hazel. Hazel does not contribute any money to the account.
B. Ellen deposits $100,000 cash and Dennis deposits $5,000 cash into a joint savings account. Dennis withdraws $20,000.
C. Ellen gives her church $15,000.
D. Ellen pays the hospital medical bills for her friend Paige directly to the hospital.

On February first of this year, Hall learned that he was bequeathed 500 shares of common stock under his father's will. Hall's father had paid $2,500 for the stock 10 years ago and the fair market value of this stock at the date of his father's death was $4,500. However, the stock decreased six months later to a value of $4.000. The executor of the estate elected the alternate valuation date for estate tax purposes. Hall sold the stock later in the year for $4,200. How much gain or loss must Hall include in this tax return for the 500 shares sold?  

A. $1,700 LTCG
B. $200 LTCG  
C. $300 LTCL      
D. $200 STCG

In 2018, Bill gave $60,000 to his sister to pay medical bills; $40,000 to his father to help with household expenses, and $20,000 to his adult son. Bill and his wife elect gift splitting. What is the total of Bill's' taxable gifts (remember the change in the 2018 annual exclusion)?       
A. none
B. $15,000  
C. $20,000  
D. $60,000

Mary Jones died in 2017 with a taxable estate of $6,000,000. What is her estate tax liability?
A. $204,000
B. $2,400,000      
C. $0  
D. $220,000

Vincent makes the following property transfers in the current year.
·    $20,000 for tuition given to the grandson
·    $1,000 medical expense for a child paid directly to a hospital\
·    $500 donation to the Democratic party
·    $10,000 property settlement in conjunction with a divorce
Vincent's gifts for the year before considering the annual gift tax exclusion total
A. $0
B. $21,000      
C. $20,000  
D. $21,500.

Betty dies on February 20 of the current year. Her estate consisted of the following assets, all valued as of her date of death:
Stock with a basis of $40,000 and a fair market value of $200,000. The stock was purchased in Joint Tenancy with her sister, with Betty paying all of the purchase price.
Land valued at $1,500,000 and a basis of $490,000. The land was purchased with her brother in Joint Tenancy, with her brother paying 60% of the purchase price.
Cash of $70,000

What is Betty’s gross estate?      
A. $870,000.
B. $600,000.  
C. $1,770,000.  
D. $1,670,000.

Answer 1

1)

False Statement - A.

Reason - willingness is not considered while computing tax liability of a company. 'Willed' to something does not mean that tax liability has reduced. To eliminate or reduce tax liability related to charitable organization, as estate should provide charity first then it would be eligible for getting reduced tax liability.

2)

Taxable option would be - B.

Reason - In case B ellen deposits $100,000 cash into a joint account which would be considered as a gift and will come under the taxation criteria since cash gift or kinds exceeding $50,000 would be taxable as per the income tax act.

3)

Correct Option - A.

Reason - Computation of Loss or gain on sale of 500 shares

Gain/Loss = Purchase amount of share- Selling price of shares

= $2,500 - $4,200

= $1,700

Thus, Hall will include $1,700 as LTCG in his tax return.

4)

Correct option - D.

Reason - $60,000 would be taxable since $60,000 given by bill to his sister for medical bills is not considered. Medical bills related to Self, Spouse, Children, Parents are only allowed to get the exemption.

5)

Correct option - C.

Reason - In case of death of an assesee his legal heirs are responsible to pay off the liability till the extent they have assessee's Fixed assets of sources of payment.

6)

Correct option - D.

Reason - Tution fee, medical expenses, and donation does not considered in gifts it got exempted under various sections of income tax act.

7)

Correct option - B.

Reason - Betty estate will consider the following basis assets-

Stock = $40,000

Land = $490,000

Cash = $70,000

Total of $600,000 would be the Betty's estate.