MODULE 40 TAXES: GIFT AND ESTATE
MULTIPLE-CHOICE ANSWERS
LA. Gift Tax
I. (c) The requirement is to determine the amount of
V;he $30,000 gift that is taxable to the Briars for 20 I O. Steve
and Kay (his spouse) elected to split the gift made to Steve's
sister, so each is treated as making a gift of $15,000. Since
both Steve and Kay would be eligible for a $13,000
exclusion, each will have made a taxable gift of $15,000-
$13,000 exclusion = $2,000.
. 2.(c) The requirement is to determine the maximum
exclusion available on Sayers' 2010 gift tax return for the
$50,000 gift to Johnson who needed the money to pay medi-
cal expenses. The first $13,000 of gifts made to a donee
during calendar year 2010 (except gifts of future interests) is
excluded in determining the amount of the donor's taxable
gifts for the year. Note that Sayers does not qualify for the
unlimited exclusion for medical expenses paid on behalf of a
donee, because Sayers did not pay the $50,000 to a medical
care provider on Johnson's behalf.
3 (d) The requirement is to determine the amount of
gift that is excludable from taxable gifts. Since the inter~st
income resulting from the bond transferred to the trust WIll
be accumulated and distributed to the child in the ~
upon reaching the age of twenty-one, the gift (represented by
the $8,710 present value of the interest to be received by the
child at age twenty-one) is a gift of a..!.uture inter~tand is
not eligible to be offset by an annual exclusion.
4. (c) The requirement is to determine the correct
statement regarding the unified transfer tax rate schedule.
The unified transfer tax rate schedule applies on a cumula-
tive basis to both life and death transfers. During a person's
lifetime, a tax is first computed on cumulative lifetime tax-
able gifts, then is reduced by the tax on taxable gifts made in
prior years in order to tax the current year's gifts at applica-
ble marginal rates. At death, a unified transfer tax is com-
puted on total life and death transfers, then is reduced by the
tax already paid on post-1976 gifts, the unified transfer tax
credit, state death taxes, foreign death taxes, and prior trans-
fer taxes.
5. (c) The requirement is to determine which gift re-
quires the filing of a gift tax return when the amount trans-
685
MULTIPLE-CHOICE ANSWER EXPLANATIONS
the available annual gift tax exclusion. A gift
payments for college books, supplies, and
dormitory fees on behalf of an individual unrelated to the
donor requires the filing of a gift tax return if the amount of
payments exceeds the $12,000 ($13,000 for 2009) annual
exclusion. In contrast, no gift tax return need be filed for
medical expenses or college tuition paid on behalf of a
donee, and campaign expenses paid to a political organiza-
ere are unlimited exclusions available for
s afte;-t"he" annual exclusion has been used.
The requirement is to determine the due date for
filing a 2010 ift tax return (Form 709). A gift tax return
must be filed on calendar-ye~sis, with the return due
and tax paid on or before April 15th of the following year.
ubsequently dies, the gift tax return is due not
later than the date for filing the federal estate tax return
(generally ~ months after date of death). Her~, since
Vega was stillli ving in 2011, the due date for filing the 2010
gift tax .return is April 15,2011.
requirement is to determine Jan's total ex-
clusions for gift tax purposes for 2010. In computing a do-
nor's gift tax, the first $13,000 of gifts made to a donee dur-
ing calendar year 2010 is excluded in determining the
amount of the donor's taxable gifts. Thus, $13,000 of the
$15,000 given to Jones, $13,000 of the $14,000 given to
Craig, and all $5,000 given to Kande can be excluded, re-
sulting in a total exclusion of $31,000. Jan's gift to Craig
does not qualify for the unlimited exclusion of educational
gifts paid on behalf of a donee because the amount was p~d
8. directly
(b) Thetorequirement is to determine
Craig. All $14,000 the amount
could have of
been excluded If
Jirn'sJan
gifthad
taxmade
maritalthededuction for 2010.
tuition payment An unlimited
directly to the college.
marital deduction is allowed for gift tax purposes for gifts to
a donee, who at the time of the gift is the donor's spouse.
Thus, Jim's gift of $75,000 to Nina made~their wedding
is eligible for the marital deduction, ~s the gift of the
$50,000 engagement ring does not gualify b~se Jim and
Nina were not married at ift. The gift tax annual
exclusion of $13,000 applies to multiple gifts to the same
donee in chronological order, reducing the taxable gift of the