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18 Cards in this Set

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  • Back
What was the gift tax exemption from 2004-2009
$1 million
What is the DEFAULT rule for 2010 decedents?
$5M estate and gift tax exemption; 35% tax thereafter
Tax exclusive vs. tax inclusive

Which is the estate tax and which is the gift tax (and why)
The estate tax is tax inclusive (tax is imposed on the entire amount transferred, including the amount to pay the taxes)

The gift tax is tax exclusive (tax is only imposed on the amount gifted; property used to pay the tax is not taxed)
What is the effect of a decedent making a gift within three years of his death?
gift tax paid is included in taxable estate (loss of tax exclusivity benefits)
Calculating taxes under unified system -- how?
calculated on basis of total of previous transfers subject to gift tax + amount transferred at death
What are the first two steps to calculating the estate tax?
1. Determine gross estate
2. Determine taxable estate by reducing gross estate by appropriate exclusions and deductions (e.g. expenses of administration, charitable and marital deductions, debts and expenses)
After the taxable estate has been calculated, what are the next steps to calculate the estate tax?
1. calculate a "tentative tax" by using the rate table in IRC 2001(c)
2. reduce the "tentative tax" by the amount of gift tax payable on lifetime taxable gifts using rates in effect at death
3. Reduce tentative tax by the remaining applicable credit amount not used by taxable gifts.
Gross estate includes "worldwide assets" for what classes of people?
citizens and residents
Gross estate includes only assets with U.S. situs for what class of people
non-resident aliens
Does right to possession or enjoyment of a property that has been gifted away subject it to estate inclusion?
Yes
How do you avoid giving a general power of appointment?
1. Don't allow distribution to decedent, decedent's estate, or decedent's creditors.
2. Limit to ascertainable standard
3. allow power to be exercised only in conjunction with creator or someone with adverse interest
When are life insurance proceeds included in an estate?
1. when receivable by decedent's estate
or
2. if decedent had incidents of ownership at death (e.g. ability to change beneficiaries or borrow against policy)
Does the power to remove and replace 3rd party trustees without cause result in estate tax inclusion?
no, so long as the 3rd party trustee is not related or subordinate.
Does payment of life insurance premiums within 3 years before death result in inclusion of those amounts as a gift?
no, only transfer of the policy.

not payment of premiums.
As a general rule, are life insurance proceeds subject to income tax?
No.
exceptions include where transfer was for consideration or a loan was involved.
when should an ILIT be established?
1. In order to avoid estate tax inclusion of proceeds.
2. Must be more than three years before death of grantor
3. Trust should be set up before application is filed.
4. application should be in name of ILIT trustee (not the settlor)
some examples of gifts not subject to annual exclusion
1. Tuition programs
2. directly-paid medical expenses
3. charitable contributions
4. marital gifts
What is the Statute of Limitations for reported gifts?
3 years after the gift is disclosed on a gift tax form.