a. Only items (3) and (4) are includible. 36. d. Only the funeral expenses are deductible. Note that post-mortem interest is generally nondeductible. 37. c. The tax is only deductible if the property is includible. 38. a. A remainder is not a terminable interest, but only its actuarial value is deductible. 39. b. A QTIP trust may be the result of an inter vivos, as well as a testamentary, gift. 40. a. (4(15) + 2(20))/6 = $16.67. 41. d. (4(20) + 2(15))/6 = $18.33. 42. b. $175,000 + $58,000 + $2,000 = $235,000. 43. c. $170,000 + $56,000 + $1,500 = $227,500. 44. d. Attorney’s fees of $10,000. 45. b. Unless terminable, interspousal gifts made after 1981 are nontaxable and nonreportable. 46. a. There is no support obligation to a 22-year-old and even if there was, the item is not ‘’necessary 47. support.’’ c. No return is due if the entire value of the donated property quali fi es for a gift tax charitable deduction. 48. b. Nothing since none is due. 49. a. Each spouse has one exclusion. 50. d. They must be married at the time the gift is made to elect gift-splitting. 51. c. Adjusted taxable gifts after 1976 are added to the taxable estate. 52. d. $3,000 + $5,500 + (.20 × $100,000) + $50,000. 53. d. $800,000 + $1,000,000. 54. c. Since 1982, gifts of life insurance are the main source of the three-year rule. 55. b. Only the deceased ‘s estate can use the credit equivalence. 56. d. Code Sec. 2041. 57. b. Only tenancy-in-common. 58. d. All of the methods could be applicable. 59. c. Joint tenancy bypasses probate and the decedent’s creditors. 60.
706 CCH Federal Taxation—Basic Principles Chapter 17 © 2010 CCH. All Rights Reserved. ANSWERS TO SUPPLEMENTARY PROBLEMS—CHAPTER 17 The estate tax liability is $386,825, determined as follows: 61. Gross estate $4,200,000 Less: Funeral expenses $1,500 Administration expenses 100,000 101,500 Taxable estate 4,098,500 Plus: Adjusted taxable gifts 350,000 Estate tax base $4,448,500 Tentative estate tax First $3,000,000 $1,455,800 Plus: 45% of $948,500 426,825 1,882,625 Gift tax credit $40,000 Plus: Uni fi ed credit 1,455,800 1,495,800 Estate tax payable $386,825 a. The full $300,000 value is included in H’s estate since he made 100 percent of the contribution to the 62. purchase price. On the other hand an offsetting marital deduction would be available. b. Nothing is includible in W’s estate since she made no contribution to the purchase price. This follows from the tracing rule in Code Sec. 2039(b). c. Same as (a) since contributions made by the decedent’s employer are attributed to such decedent under Code Sec. 2039(b). d. One-half of $300,000 would be included in H’s estate since the policy would be deemed purchased equally by each spouse. e. Nothing is includible in either spouse’s estate since neither policy has a survivorship feature. f. Private annuities are valued using the monthly changing Treasury tables. The portion of the annuity includible in an estate stays the same, but there is no need to obtain individuals policy replacement values from the issuer. a. 50 percent (Code Sec. 2040(b)) 63. b. Nothing (Code Sec. 2040(a)) c. 50 percent (Code Sec. 2033) d. 60 percent (Code Sec. 2033) a. Hilda acted as his agent. As a result, a transfer of the policy took place within three years of death and 64.
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