CTC Estate & Gift Tax Planning

Question 1

What is the primary purpose of the annual gift tax exclusion under the IRC?

Accepted Answer

To allow taxpayers to transfer wealth tax-free up to a specified amount per recipient per year without using their lifetime exemption

Answer

The annual gift tax exclusion permits donors to give up to the inflation-adjusted threshold per recipient per year without triggering gift tax or reducing the donor's lifetime applicable exclusion amount.

Question 2

Which of the following transfers qualifies for the unlimited marital deduction?

Accepted Answer

A bequest to a surviving spouse who is a U.S. citizen

Answer

The unlimited marital deduction under IRC Section 2056 applies only when the surviving spouse is a U.S. citizen; non-citizen spouses require a Qualified Domestic Trust (QDOT) to defer estate tax.

Question 3

What does the concept of 'portability' mean in the context of the federal estate tax?

Accepted Answer

A surviving spouse may elect to use the deceased spouse's unused applicable exclusion amount

Answer

Portability, enacted under the Tax Relief Act of 2010 and made permanent in 2013, allows a surviving spouse to elect the Deceased Spousal Unused Exclusion (DSUE) amount, effectively preserving the first spouse's unused exemption.

Question 4

Under IRC Section 1014, the 'step-up in basis' rule provides that:

Accepted Answer

Inherited assets receive a new cost basis equal to the fair market value at the decedent's date of death

Answer

IRC Section 1014 resets the cost basis of inherited assets to their fair market value on the date of death, potentially eliminating income tax on all appreciation that occurred during the decedent's lifetime.

Question 5

Which statement correctly describes the gift-splitting election under IRC Section 2513?

Accepted Answer

A married couple may elect to treat a gift made by one spouse as if each spouse made one-half of the gift

Answer

IRC Section 2513 allows married couples to elect gift-splitting, treating a gift made by one spouse as equally made by both, effectively doubling the annual exclusion per recipient and the applicable lifetime exemption used.

(CTC) Chartered Tax Consultant Practice Test

(CTC) Chartered Tax Consultant Practice Test

CTC Estate & Gift Tax Planning