Maxine, who is single, makes the following gifts
Section 4
1- Maxine, who is single, makes the following gifts during the current tax year. Assume that the gift tax exclusion is $14,000.
$16,000 to son to buy a new car
$20,000 to University of North Alabama to pay niece’s tuition
$25,000 to the Independent Christian Church
What portion of these gifts is subject to the gift tax after consideration of the annual exclusion?
$60,000.
$22,000.
$ 9,000.
$ 2,000.
= $2,000
————————————————————————————————————————————————-
2- Which of the following gifts will cause a gift tax liability to be incurred?
$40,000 cash gift to spouse.
$10,000 cash gift to United Way, a charitable organization.
$15,000 to friend that she will use to pay her medical expenses.
$ 8,000 to Friends of the Democratic Party.
= $15,000 friend that she will use to pay her medical expenses.
————————————————————————————————————————————————-
3- If a taxpayer does not want to pay the alleged tax deficiency before going to court against the IRS, which court must the taxpayer use?
United States Tax Court.
United States District Court.
United States Court of Federal Claims.
People’s Court.
= United States Tax Court.
————————————————————————————————————————————————-
4- Assume that the unified credit for the taxpayer’s year of death can shelter $5,000,000 from tax. Which of the following statements is true if the taxpayer was single?
The decedent could give away $5,000,000 during life and another $5,000,000 at death without paying any gift or estate tax.
The decedent could give away $2,500,000 during life and another $2,500,000 at death without paying any gift or estate tax.
The decedent could give away a total of $5,000,000 at death or at life combined.
The unified credit could be applied only to the gift tax – not to the estate tax.
= The decedent could give away a total of $5,000,000 at death or at life combined..
————————————————————————————————————————————————-
5- Which of the following is a secondary source of the tax law?
Revenue Ruling.
Private Letter Ruling.
Treasury Regulation.
Tax article in the Wall Street Journal.
=Revenue Ruling.
————————————————————————————————————————————————-
6- Which of the following business owners has unlimited liability?
General partner.
S Corporation shareholder.
Limited liability company member.
Limited partner.
= General partner.
————————————————————————————————————————————————-
7- ABC Trust has taxable income before distributions for the year of $20,000 and distributable net income of $18,000. During the year it distributed $21,000 to its beneficiaries. What deduction will ABC be able to take for the distribution?
$ 0.
$18,000.
$20,000.
$21,000.
= $ 18,000.
————————————————————————————————————————————————-
8- STU Trust has taxable income for the year of $35,000 and distributable net income of $32,000. Distributions to beneficiaries for the year total $20,000. How much income in total is taxed to the beneficiaries?
$ 0.
$20,000.
$32,000
$35,000.
= $20,000.
————————————————————————————————————————————————-
9- Meredith and Taylor own land as joint tenants with right of survivorship. The land was purchased five years ago for $100,000. Meredith contributed $60,000 of the purchase price and Taylor contributed $40,000. Meredith died during the current tax year when the land was valued at $200,000. How much of the land is included in her gross estate?
$ 0.
$100,000.
$120,000.
$200,000.
= $0 is included in her estate because the property was right of survivorship meaning the surviving party retains full ownership upon death of the other party..
————————————————————————————————————————————————-
10- Charles purchased a car for $40,000 and titled it in the name of him and his son, Alvin, as equal tenants in common. Assume that the annual gift exclusion for the current year is $14,000. Which of the following statements is true?
Charles’ taxable gift to his son is $40,000.
Charles has not made a gift to his son at this time.
Charles’ gift to his son is $26,000 net of the gift tax exclusion.
Charles’ gift to his son is $6,000 net of the gift tax exclusion.
= $6,000 net of the exclusion because tenancy in common means they each own 50%. $40,000 x 50% = $20,000 gift to son Less the exclusion (14,000) Taxable gift to son. 6,000.
————————————————————————————————————————————————-
11- This year Dan transferred property worth $32,000 to a trust with the income to be paid to his 25-year old niece, Lissie. After the niece reaches age 32, the remainder interest is to be distributed to Dan’s brother, Adam. The income interest is valued at $15,000 and the remainder interest is valued at $17,000. Assume that the annual gift exclusion for the current year is $14,000 and that Dan has not made any previous gifts during his lifetime. Which of the following statements is false?
The gift to Adam, net of the annual exclusion, is $3,000.
The gift to Adam is $17,000.
The gift to Lissie, net of the annual exclusion, is $1,000.
Dan can use part of the unified credit to offset the gift tax liability from these gifts.
= The gift to Lissie, net of the annual exclusion, is $1,000.
————————————————————————————————————————————————-
12- Rowene died during the current tax year on March 27. The executor of her estate property elected the alternate valuation date to value her property. A parcel of land that she owned was valued as follows:
March 27 $500,000
September 27 $400,000
October 15 $375,000
The land was distributed to her beneficiary, Margaret, on October 15. This land should be included in her gross estate at what value?
$ 0.
$375,000.
$400,000.
$500,000.
= $0.
————————————————————————————————————————————————-
13- Which of the following items are included in the gross estate of an individual who died in the current year?
1. Personal lawnmower.
2. Land gifted to her son four years ago.
3. A revocable trust established five years ago.
Only 1.
1 and 3.
1 and 2.
2 and 3.
= 1 and 3.
————————————————————————————————————————————————-
14- Which of the following is not allowed as a deduction against the gross estate?
Funeral expenses.
A mortgage of $200,000 on a personal residence valued at $300,000.
A casualty loss incurred before the date of death.
A charitable contribution authorized by the decedent’s will.
= A casualty loss incurred before the date of death.
—————————————————————————————————————————————————
15- Which of the following statements is false with regard to the computation of the estate tax?
The gift tax paid (computed using the gift tax rates in effect in the year of death) on certain gifts made during the decedent’s life is allowed as a deduction against the estate tax.
All taxable gifts made during the decedent’s life are included in computing the estate tax base.
The marital deduction reduces the estate tax base.
Administrative expenses reduce the estate tax base.
= All taxable gifts made during the decedent’s life are included in computing the estate tax base.
————————————————————————————————————————————————-
16-When computing distributable net income for a trust, the following adjustments are made to taxable income, except for:
Add back the exemption allowed.
Add back tax-exempt income.
Add back net capital losses.
Subtract net capital losses allocable to corpus.
= Subtract net capital losses allocable to corpus.
————————————————————————————————————————————————-
17- Which of the following is not income in respect of a decedent?
Dividends declared after the date of death on stock owned at the date of death.
Rental income earned but not received before death.
Interest income accrued on U.S. Treasury bonds.
Wages earned before death and paid after death.
= Interest income accrued on U.S. Treasury bonds.
————————————————————————————————————————————————-
18- Taylor, a cash-basis taxpayer, died on August 13. During the year, the estate’s executor made a distribution of $125,000 from estate income to Taylor’s sole heir and adopted a calendar year to determine the estate’s taxable income.
The following additional information pertains to the estate’s income and disbursements for the year:
Estate Income
Taxable interest $45,000
Net long-term capital gains allocable to corpus 10,000
Disbursements from the estate:
Administrative expenses 12,000
Charitable contributions per will requirements 8,000
For the calendar year, what was the estate’s distributable net income (DNI)?
$35,000.
$37,000.
$47,000.
$25,000.
= $35,000.
————————————————————————————————————————————————-
19- Appeals from the Tax Court are made to which court?
Circuit Court of Appeals.
United States Supreme Court.
Court of Appeals – Federal Circuit.
United States District Court.
= Court of Appeals – Federal Circuit.
————————————————————————————————————————————————-
20- Which of the following statement is correct in terms of the weight of sources of tax authority?
Tax Court decisions have higher authority than Supreme Court decisions.
Legislative regulations have higher authority than interpretive regulations.
Revenue Rulings have higher authority than Treasury Regulations.
Tax Court decisions have higher authority than the Circuit Court of Appeals decisions.
= Legislative regulations have higher authority than interpretive regulations.
————————————————————————————————————————————————
21- Which of the following type of regulations cannot be cited as authority to support a tax position?
Temporary Regulations.
Interpretive Regulations.
Proposed Regulations.
Legislative Regulations.
= Interpretive Regulations.
————————————————————————————————————————————————-
22- Which of the following statements is false with regard to the check-the-box regulations?
A regular C corporation can be taxed as a partnership.
A single member LLC has a default classification to be disregarded.
An LLC with two members has a default classification of partnership.
An S corporation cannot be disregarded under the check-the-box regulations.
= An S corporation cannot be disregarded under the check-the-box regulations.
————————————————————————————————————————————————-
23- Which of the following entities is subject to double taxation?
S corporation.
C corporation.
Limited liability company.
General partnership.
= C corporation.
————————————————————————————————————————————————-
24- Which of the following entities will never permit the owner to get an increase in her basis for the debt of the entity?
General partnership.
Limited partnership.
Limited liability company.
S corporation.
= General partnership.
25- Which of the following is not a difference between a general partnership and an S corporation?
S corporation owners have limited liability but general partners do not.
For S corporations to be organized tax-free a control test must be met, but this is not the case for partnerships.
Separately stated items retain their tax character when they flow from the partnership but not from an S corporation.
Distributions to partners are usually not taxable but distributions to S corporation shareholders are often taxable.
= For S corporations to be organized tax-free a control test must be met, but this is not the case for partnerships.
————————————————————————————————————————————————-
26- Which of the following standards sets the highest burden of proof for support for a position taken on a tax return?
Realistic possibility.
Reasonable basis.
Substantial authority.
More likely than not.
= More likely than not.
————————————————————————————————————————————————-
27- Which of the following is not an estimated payment date for an individual’s Year 12 tax return?
April 15, Year 12.
July 15, Year 12.
September 15, Year 12.
January 15, Year 13.
= July 15, Year 12.
————————————————————————————————————————————————-
28- Jermaine’s tax liability for Year 7 was $18,000 and he had taxable income of $100,000. For Year 8 he had taxable income of $120,000 and a tax liability before withholding and estimated payments of $21,000. To avoid an underpayment of estimated tax penalty for Year 8, the minimum amount of estimated tax payments that Jermaine must make is:
$16,200.
$18,000.
$18,900.
$21,000.
= $21,000.
————————————————————————————————————————————————-
29- Felicia, a calendar-year taxpayer, reported gross income of $150,000 on her Year 9 income tax return. She mistakenly omitted from gross income a $30,000 long-term capital gain that should have been included in Year 9. Felicia filed her Year 9 return on April 1, Year 10.
To collect the tax on the $30,000 omission, the Internal Revenue Service must assert a notice of deficiency no later than:
April 1, Year 13.
April 15, Year 13.
April 1, Year 16.
April 15, Year 16.
= April 15, Year 16.
————————————————————————————————————————————————-
30- Marty forgot to file his tax return for Year 8. His taxable income for Year 8 was $350,000. His tax liability before payments was $74,000. He had federal income tax withheld from his pay of $52,000 and made estimated tax payments of $23,000. He finally filed his Year 8 tax return on December 10, Year 9. How much does Marty owe in penalties due to this late filing?
$ 0.
$ 7,400.
$14,700.
$55,500.
= $ 0.
————————————————————————————————————————————————-
I think the answer to #2 is $15,000 because the gift is to a person. A gift to a spouse is not taxable because a married couple is one taxable entity
For #4 the best answer is the decedent could give away a total of $5M in life and death combined. The unified credit is a total figure therefore is a maximum that can be given without tax implications
I think the answer to #7 is $18,000, but cannot confirm for sure. I remember reading that they can deduct an income amount. Check your notes to make sure. For #9 the answer is $0 is included in her estate because the property was right of survivorship meaning the surviving party retains full ownership upon death of the other party.
#10- I think the answer is $6,000 net of the exclusion because tenancy in common means they each own 50%. $40,000 x 50% = $20,000 gift to son Less the exclusion (14,000) Taxable gift to son. 6,000
Collepals.com Plagiarism Free Papers
Are you looking for custom essay writing service or even dissertation writing services? Just request for our write my paper service, and we'll match you with the best essay writer in your subject! With an exceptional team of professional academic experts in a wide range of subjects, we can guarantee you an unrivaled quality of custom-written papers.
Get ZERO PLAGIARISM, HUMAN WRITTEN ESSAYS
Why Hire Collepals.com writers to do your paper?
Quality- We are experienced and have access to ample research materials.
We write plagiarism Free Content
Confidential- We never share or sell your personal information to third parties.
Support-Chat with us today! We are always waiting to answer all your questions.
