36 Questions
What is a potential benefit of making a gift-splitting election?
Reducing the total taxable gift and potentially lowering the tax rate
What type of interest is not eligible for a marital deduction?
An interest that terminates upon an event or after a specified amount of time
What is the limitation of the gift-splitting election?
It is limited to the value of the gift after the annual exclusion
What is a requirement for both spouses to make a gift-splitting election?
They must both consent to the election on a timely gift tax return
What is the benefit of using the annual exclusion in gift tax calculation?
It reduces the total taxable gift
What is the result of a gift-splitting election on the gift tax return?
It applies to all completed gifts
What is the value at which property is included in the taxable gift?
Fair market value at the date of the gift
What is the first step in calculating the present value of a future interest?
Calculate the present value of the present interest first
Which of the following is not a gift excluded from tax?
Charitable contributions
What is the purpose of the §7520 interest rate in valuing temporal interests?
To determine the present value of the future interest
What is the result of calculating the present value of the future interest and the present interest?
The taxable gift
What is the definition of fair market value?
The price at which the property would change hands between a willing buyer and a willing seller
What is the amount of cumulative transfers that can be made without incurring a tax?
$12.92 million
What is the term used to describe the amount of the exemption equivalent?
Applicable exclusion amount
Which of the following deductions is unlimited for transfers to a spouse?
Marital deduction
What is the common feature of federal transfer taxes that refers to the exemption equivalent?
Exemption equivalent
How is the applicable credit related to the exemption equivalent?
The applicable credit is a tax credit on the exemption equivalent
What is the result of making cumulative transfers that exceed the exemption equivalent?
A tax is incurred on the amount exceeding the exemption equivalent
What is the definition of fair market value?
The price at which a willing buyer and a willing seller would exchange the property.
Which of the following transfers is not excluded from the gift tax?
Revocable gifts.
What is the primary purpose of the annual exclusion in gift tax calculation?
To reduce the amount of taxable gifts.
How is the present value of a future interest calculated?
By using the §7520 interest rate.
What is the result of making cumulative transfers that exceed the exemption equivalent?
A gift tax is incurred.
What is the valuation method used for future interests, such as remainders?
Discounting the future payment by the §7520 interest rate
How is the valuation of property for transfer tax purposes determined?
By using the fair market value on the date of the transfer.
What is the primary purpose of the §7520 interest rate in valuing temporal interests?
To calculate the present value of future interests
Which of the following types of gifts does not qualify for the annual exclusion?
Gifts of life estates
What is the correct formula to calculate the value of a remainder interest?
Value of remainder interest = (Future payment) / (1 + r)^n
What is the primary difference between the valuation of present interests and future interests?
Present interests are valued at fair market value, while future interests are valued at present value
What is the effect of the marital deduction on the gift tax calculation?
It reduces the taxable gifts by the value of the property transferred to the spouse
What is included in the gross estate besides the property possessed by the decedent at death?
The value of certain transfers made during lifetime that take effect at death
What is the purpose of calculating the present value of a future interest?
To value the interest for gift tax purposes
What is the benefit of using the annual exclusion in gift tax calculation?
It reduces the value of the gift for tax purposes
What is the term used to describe the amount of the exemption equivalent?
Applicable exemption amount
Which of the following is a gift excluded from tax?
Gifts to charitable organizations
What is the valuation method used for property included in the probate estate?
Fair market value
Test your knowledge on calculating taxable gifts, including the gift-splitting election, its benefits, and the requirements for making this election. Learn how to reduce the total taxable gift and take advantage of the annual exclusion or exemption.
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