Tax Consulting Estate and Gift Tax 1 — Questions and Answers
Question 1: What is the annual gift tax exclusion amount per recipient for 2024?
- $10,000
- $15,000
- $17,000
- $18,000 (Correct answer)
Correct answer: $18,000
The annual gift tax exclusion for 2024 is $18,000 per recipient, allowing donors to give this amount to any number of individuals without using their lifetime exemption.
Question 2: The federal estate tax exemption (unified credit equivalent) for 2024 is approximately:
- $3.5 million
- $7.5 million
- $12.92 million
- $13.61 million (Correct answer)
Correct answer: $13.61 million
The federal estate and gift tax exemption is $13.61 million per individual in 2024, meaning estates below this threshold owe no federal estate tax.
Question 3: What is the 'step-up in basis' rule for inherited property?
- Heirs must use the decedent's original cost basis
- Inherited property receives a new basis equal to fair market value at the date of death (Correct answer)
- Basis is increased by the amount of estate tax paid
- No basis adjustment occurs for inherited assets
Correct answer: Inherited property receives a new basis equal to fair market value at the date of death
Property inherited at death receives a stepped-up basis equal to its fair market value on the date of death, eliminating unrealized capital gains from the decedent's holding period.
Question 4: Which estate planning trust allows a surviving spouse to postpone estate taxes until the second spouse's death?
- Bypass Trust (Credit Shelter Trust)
- Qualified Terminable Interest Property (QTIP) Trust (Correct answer)
- Irrevocable Life Insurance Trust (ILIT)
- Grantor Retained Annuity Trust (GRAT)
Correct answer: Qualified Terminable Interest Property (QTIP) Trust
A QTIP Trust qualifies for the unlimited marital deduction, deferring estate taxes until the surviving spouse's death while allowing the first spouse to control ultimate distribution of assets.
Question 5: What is 'portability' in the context of estate taxes?
- The ability to transfer assets across state lines tax-free
- A deceased spouse's unused estate tax exemption can be transferred to the surviving spouse (Correct answer)
- The right to move retirement accounts without tax
- Carrying forward unused charitable deductions
Correct answer: A deceased spouse's unused estate tax exemption can be transferred to the surviving spouse
Portability allows the executor of a deceased spouse's estate to elect to transfer any unused estate tax exemption to the surviving spouse, effectively doubling the couple's total exemption.
Question 6: The federal gift tax return is filed on which form?
- Form 709 (Correct answer)
- Form 706
- Form 1041
- Schedule D of Form 1040
Correct answer: Form 709
Form 709 (United States Gift and Generation-Skipping Transfer Tax Return) is filed to report taxable gifts and gifts that reduce the lifetime exemption.
Tax Consulting Estate and Gift Tax 1
What is the annual gift tax exclusion amount per recipient for 2024?